Published tribunal order
Tenancy Tribunal case 4541810 — Exemplary damages at Unit/Flat 1, 107 Main North Road, Papanui, Christchurch
Decided 18 Aug 2023 · Published 18 Aug 2023 · Application 4541810
Tenant favoured
- Exemplary damages
Order
- No application for suppression has been made in this case and no suppression orders apply around publication of this decision.
- Orbit Property Management Limited as agent for Christine Kirkeby must pay Emma Leigh Joy $1,177.94 immediately, calculated as shown in table below:
- The application for exemplary damages for the non-lodgement of the bond is dismissed.
Reasons
- Both parties attended the hearing. Ms Croucher represented the landlord. Background
- The tenancy was a 1-year fixed term tenancy that was due to commence on 8 September 2022. For reasons unrelated to this application the start date was amended to 14 September 2022.
- When the tenant arrived at the premises to take possession, she found them not reasonably clean. The gardens were not done. There had been a leak in the conservatory. The power was not connected.
- The tenant took advice and decided that she would not take up the tenancy. In other words, she cancelled the contract.
- Ms Croucher arranged to have a cleaner and gardener within 90 minutes of her creating a work order and she arranged a temporary power supply. The work was completed later that day.
- Through a friend, the tenant advised Ms Croucher that she would not move her possession into the premises, nor, as was suggested, into the garage.
- Ms Croucher took the tenant’s communications as a request for a ‘break lease’ and she initiated that procedure. The tenant sent the furniture removal truck back to put her goods into storage.
- The landlord retained the 2 weeks’ rent the tenant paid in advance, 2 further days’ rent (a new tenancy started on 30 September 2022); and ‘break lease’ costs of $329.00.
- Together the rent and break lease fees total $1,426.29. The tenant seeks compensation by way of a refund of that amount and the furniture truck hire fee of $600.00.
- The tenant also seeks exemplary damages for the non-lodgement of the bond by the landlord. Issues
- The issues the Tribunal must determine are these: •Could the tenant cancel the contract (the tenancy agreement)? •Should the tenant be released from the fixed term tenancy as at 14
September 2022, the day the tenancy started?
•Did the landlord breach the provisions of the Residential Tenancies Act 1986 (RTA)? If so, should the tenant be awarded compensation and exemplary damages?
•Did the landlord’s failure to lodge the bond constitute an unlawful act? If so, should the Tribunal award exemplary damages? Could the tenant cancel the contract (the tenancy agreement)?
- One party cannot unilaterally simply cancel a contract. Cancelling a contract usually requires there to have been a breach of a fundamental term. This is called a repudiation.
- There is a difference between a breach of contract and a repudiation of contract. A breach occurs when one party fails to meet their contractual (or in this case statutory) obligations. Repudiation involves a party demonstrating through their conduct that they no longer intend to be bound by the contract.
- A breach is usually capable of remedy and therefore does not give a party a right to just cancel the contract. Here, the landlord breached its section 45(1)(a) and (b) RTA responsibilities to provide the premises in a reasonable state of cleanliness and to provide the premises (including the gardens) in a reasonable state of repair.
- Ms Croucher acted on that immediately once the tenant brought it to her attention. A cleaner, gardener and builder attended the premises later that day and a painter finished painting work the following day.
- So, the landlord’s breaches were promptly remedied.
- Because there was no repudiation of the contract by the landlord, the tenant was not entitled to simply cancel the contract. The contract – the tenancy agreement - remained in force. Should the tenant be released from the fixed term tenancy as at 14
September, the day the tenancy started?
- The Tribunal may reduce a fixed term tenancy where: a. there has been an unforeseen change in the applicant’s circumstances; and b. there would be severe hardship to the applicant if the term is not reduced; and c. the applicant’s hardship would be greater than the hardship to the other party if the term is reduced. See section 66(1) RTA.
- The statutory test for the Tribunal to release a party from a fixed term tenancy is a high one. Here, there was no unforeseen change in the tenant’s circumstances resulting in severe hardship if the term of the tenancy were not reduced.
- Objectively viewed, the tenant could have waited longer to see what happened. The cleaning and gardening work and the leak in the conservatory were all attended to within a matter of hours. Her decision not to proceed with the tenancy was made too quickly. Her actions do not satisfy the statutory criteria to be released from the fixed term tenancy.
- The tenant said that the owner of the premises agreed to release her from the tenancy. That is correct. But Ms Croucher made it clear in her email correspondence produced in evidence that the ‘break lease’ procedure would apply. The tenant would be liable for rent until a new tenancy was found, and for the landlord’s reasonable costs finding a new tenant. Did the landlord breach the provisions of the RTA? If so, should the tenant be awarded compensation and exemplary damages?
- Section 45(1) sets out a landlord’s responsibilities. A landlord must provide the premises in a reasonable state of cleanliness and provide the premises in a reasonable state of repair.
- Here, the premises were objectively not in a reasonable state of cleanliness, the gardens were not up to a reasonable standard, and there was a leak in the conservatory which had made an area of carpet wet.
- The owner and/or her agent should have been aware of these matters before the tenancy started, although the leak possibly occurred quite recently before the tenant arrived. That the tenant discovered them when she arrived to take possession shows that the landlord breached its responsibilities.
- Sometimes, landlords are so keen to get premises rented that they overlook the essentials. The owner had arranged for a painter to do work at the premises and had assumed the painter had cleaned the premises. An inspection before the tenant took possession would have identified the lack of cleaning and garden work.
- A failure by a landlord to comply with their section 45 RTA responsibilities is an unlawful act – see section 45(1A) RTA.
- Exemplary damages are awarded at the Tribunal’s discretion when one party has proved that the other party has committed a defined unlawful act. If that is proven, and before the Tribunal may award exemplary damages, it must take account of the factors set out in section 109 RTA. Those factors are: •The intention of the person; •The effect of the unlawful act; •The interests of the party against whom the unlawful act was committed; and •The public interest.
- I find that the landlord committed an unlawful act by failing to ensure that the premises were provided in a reasonable state of cleanliness and that the gardens were maintained.
- Because the landlord acted so promptly to remedy the breaches, the effect on the tenant was greatly reduced (even though she did not take up the tenancy). The maximum amount of exemplary damages for this unlawful act is $7,200.00. Taking all matters into account I award the tenant exemplary damages of $700.00.
- Compensation is different. It is not punitive. It simply compensates a party for a loss that follows a breach.
- In Birch v Otautahi Community Housing Trust [2020] NZDC 17667 the District Court confirmed that the Tribunal must take into account the following factors when deciding to award compensation: •The nature of the breach; •The duration of the breach; and •The effect of the breach on the party. .
- The tenant said she incurred a furniture removal fee of $600.00. No invoice was produced in evidence as proof of that cost. I decline to award it. And, had a more considered decision been made, the fee might well have been avoided.
- I award the tenant compensation of $400.00 for her time, stress and disruption arising from the landlord’s breach. She did not want to move into premises that were not in a reasonable state of cleanliness. Her move could have been completed later that day, but she was not to know how quickly or how well the work would be done. The wet carpet, the result of the conservatory leak, was a reasonable concern. Dampness is a known cause of mould. The tenant had children to consider as well.
- The ‘break lease’ costs charged by the landlord were objectively reasonable and necessary to secure another tenant (without which the tenant would have remained liable for rent under the tenancy agreement). I have refunded an amount of $57.50 for the ingoing inspection for the new tenant. This tenant never took up possession and the landlord had to do further work at the premises, so an inspection was necessary to check that work before the new tenancy started. That is a cost the landlord should bear. Did the landlord’s failure to lodge the bond constitute an unlawful act? If so, should the Tribunal award exemplary damages?
- The landlord committed no unlawful act by not lodging the bond. The tenant made it clear that she was not taking possession of the premises. The tenancy ended withing the 23-working-day time frame a landlord has in which to lodge the bond. The landlord deducted rent and costs from the bond and refunded the tenant the balance. This decision addresses the issues she had raised about the costs deducted. Result
- The landlord will pay the tenant $1,177.94 comprising exemplary damages, compensation, a refund of the final inspection fee, and the filing fee on the partly successful application.
- The tenant’s application for a reduction of the term of the tenancy and for exemplary damages for the non-lodgement of the bond is dismissed. Name suppression
- Upon my enquiry, neither party sought a name suppression order.