Published tribunal order
Tenancy Tribunal case 4753620 — Exemplary damages at ORDER
Decided 15 Jan 2024 · Published 15 Jan 2024 · Application 4753620
- Exemplary damages
Party names are redacted in the official published order.
Order
- The agreement between the parties is declared to be a residential tenancy agreement, to which the provisions of the Residential Tenancies Act 1986 (“RTA”) apply.
- The notice of termination issued by the landlord to the tenant dated 1 December 2023 is declared void and of no effect. 4. must pay [The tenant/s] $21,970.44 immediately as follows: LandlordTenant Exemplary damages: Unlawful premises$13,000.00 Exemplary damages: Fail to provide written agreement and provide required information $750.00 Exemplary damages: Fail to meet HH standards$7,200.00 Compensation: breach of right to quiet enjoyment Filing Fee $1,000.00 $20.44 Total award$21,970.44 Total payable by Landlord to Tenant$21,970.44
Reasons
- Both parties attended the hearing.
- I am satisfied that the property of which these premises form part, is owned by the trustees of the McIntyre Family Trust on whose behalf Mr McInyre was acting, except that it seems that power was paid direct to Mr McIntyre’s business. All the tenant's dealings have been with Mr McIntyre who is referred to as the landlord in the body of this Order.
- It is appropriate that Mr McIntyre be a respondent to this application in his personal capacity as well as in his capacity as trustee of the Trust. Background
- The landlord owns a commercial property in Karamu Road, Hastings. On the street frontage to the property is the lawnmower sales and service business owned and operated by Mr McIntyre.
- At the rear of the property is warehousing and a yard (“the commercial space”). Within a small part of the commercial space is a self-contained 2-bedroom flat (“the flat”).
- On 5 July 2022 the landlord entered into a Deed of Lease with a [the commercial tenant/s] (” the Lease”). The Lease provides for [the commercial tenant/s] to lease the commercial space from the landlord, together with rights of access over the driveway, for a term of 2 years from 1 February 2022 at an initial rent of $22,620.00 plus GST per annum.
- In late 2022 the tenant arranged with [the commercial tenant/s] to move into the flat. The tenant’s evidence is that apart from one or 2 initial payments, all rent was paid by her to the landlord.
- In early 2023, [the commercial tenant/s] effectively gave up the lease and went missing, at least as far as the landlord was concerned. [the commercial tenant/s]’s goods remained stored in part of the commercial space, although the tenant's evidence is that he later sought the help of the police to recover his property after the landlord wrongfully prevented him accessing it. [the commercial tenant/s] did not give evidence at the hearing.
- The tenant was anxious to be able to stay living at the flat and asked the landlord to be able to do so. On 3 February 2023 the landlord recorded in an e-mail the following: “[The tenant] at the Flat property at 520B Karamu Road North Hastings 4122. The lease terms are on a monthly basis with Rent and Power to both be paid in advance by one week at all times. A maximum of 2 people to reside in the Flat with full photo identification details of the said two people. The main yard gate is to be closed and LOCKED at all times. NO EXCEPTIONS.....”
- The rent to be paid was $500.00 per week, which the landlord says was less than the rent then payable for the whole of the commercial space. The landlord required that the power be paid for in cash, in denominations of $5.00 and above.
- On 9 December 2023 the landlord gave the tenant Notice of Termination dated 1 December 2023, on the following terms: “Attention [The tenant/s]. As occupant of the B building at 510B Karamu Rd North Hastings 4122. We give notice that your occupancy will cease in 90 days' time on the Wednesday 28th February 2024. A reminder that the building and yard area must be clear of all your belongings and equipment and left in a tidy and clean condition. McIntyre Family Trust. Don McIntyre.” Claims
- The tenant claims fundamental breaches by the landlord of his obligations under the RTA. Namely that: a. the premises were unlawful; b. there was a failure to provide a tenancy agreement and the information that residential tenancy agreements are required to contain; c. there was a failure to comply with Healthy Homes standards; d. the landlord failed to adequately maintain the premises; e. the landlord breached her right to quiet enjoyment of the premises and harassed her; f. the notice of termination given to her was unlawful.
- There is no dispute that the flat is not consented for residential use and does not meet Healthy Homes standards. It has no windows and limited means of egress. There is little evidence of the extent to which it has compliant heating, insulation, draught stopping or ventilation. The tenant has provided evidence of leaks through the roof.
- The landlord says that he has not entered into a tenancy of residential premises with the tenant, so the RTA and Healthy Homes compliance standards do not apply. Jurisdiction
- The plan attached to the lease defines the commercial space as comprising two warehouses, adjoined in an “L”, shape, with a yard between. Under the Lease, the lessee has exclusive use of those spaces, including the yard, as well as the non-exclusive use of the access driveway which passes alongside the Landlord’s shop.
- The flat occupies part of one of the warehouses and is a stand alone structure inside the building.
- On the basis that the Lease provides for a 2-year term ending on 28 February 2024, the landlord's position is that the Lease is current. He says that the tenant took up occupation of the flat through an unauthorised sublease from [the commercial tenant/s]. He says that since [the commercial tenant/s] moved on, the tenant has effectively been paying, although at a slightly reduced rate, the rent due for the commercial space under the Lease. He says that therefore, his obligations to the tenant are those of a commercial lessor under the Lease, not those of a landlord under a residential tenancy agreement.
- The tenant points to the e-mail from the landlord dated 3 February 2023 which she says clearly shows a new agreement between her and the landlord. She says it also shows that the landlord was well aware the flat was to be lived in as a residence.
- The tenant’s evidence is that rent was always paid direct to the landlord and that she cannot have been regarded as the lessee under the Lease because the area of the commercial space she was able to use was essentially limited to the flat itself, which is only a small part of the commercial space.
- The tenant also points to the landlord’s inspections of the flat, including the taking of photographs, as well as expectations by the landlord about her behaviour, that are consistent with the landlord seeing her as a residential tenant rather than a commercial lessee.
- Section 5(1)(a) of the RTA provides that, “This Act shall not apply....... where the premises are commercial premises.”
- In s.2, “premises” are defined as including “any part of any premises”.
- The evidence persuades me that the agreement between the landlord and the tenant gave the tenant exclusive use of the flat, not the whole of the commercial space. There is evidence showing the landlord using at least part of the commercial space for his own purposes.
- I therefore consider that for the purposes of those provisions, the “premises” is the flat, not the whole of the commercial space.
- “Commercial premises” are defined in s.2 as “premises that are not residential premises”. Accordingly, if the flat comprises residential premises it cannot be excluded from the RTA as being commercial – the two are mutually exclusive,
- “Residential premises”, means, “...any premises used or intended for occupation by any person as a place of residence, whether or not the occupation or intended occupation for residential premises is or would be unlawful”. I am satisfied that both parties knew and intended that the flat would be occupied as the tenant’s home. The flat comprised residential premises.
- A tenancy, in relation to any residential premises, “.... means the right to occupy the premises (whether exclusively or otherwise) in consideration for rent...”
- I am satisfied that the parties’ agreement gave the tenant the right to occupy the flat in return for the payment of rent. This was therefore a residential tenancy.
- For those reasons I find that the landlord and the tenant are parties to a residential tenancy agreement to which the RTA applies and over which the Tribunal has jurisdiction.
- In the context of this case, it is important to note that there is no dispute that the tenant willingly entered into the agreement and asked the landlord to allow her to continue an arrangement she had entered into with [the commercial tenant/s]. However, in terms of s.11 RTA, even if a tenant apparently waives rights provided by the RTA, that waiver is ineffective, and the provisions of the RTA need to be applied. Unlawful premises
- Under s.78A For the purposes of this Act, “unlawful residential premises” means, “....... residential premises that are used for occupation for a person as a place of residence but...that cannot lawfully be occupied for residential purposes by that person (whether generally or whether for the particular residential purposes for which that person is granted occupation).”
- There is no dispute that the flat is not consented for residential occupation, is clearly not suitable for residential occupation and accordingly comprises unlawful residential premises.
- Where premises are found to be unlawful “the Tribunal may order the landlord to pay to the tenant—(i) the whole of the sum found to have been paid by way of rent for the period for which the Tribunal is satisfied that the premises are or were unlawful residential premises; or (ii) an amount that is the sum referred to in subparagraph (i) less any amount that the Tribunal is satisfied, having regard to the special circumstances of the matter, including the nature of the premises, it is fair to deduct” (s.78A(4)).
- In this case, the flat’s non-compliance was not of a merely technical nature but quite fundamental in terms of the requirements for a safe and healthy home.
- The required approach is to refund to the tenant the whole of the rent paid, then to consider whether there are special circumstances which make it fair to take a deduction from that refund in favour of the landlord.
- There are some special circumstances applying to this situation. In assessing what deduction from the refund might be fair, I take into account that the tenant has received some benefit from having occupied that flat. There is no dispute that she was anxious to remain living there after [the commercial tenant/s] was effectively no longer the occupier of the commercial space. I take into account also that the tenancy was begun by the tenant and [the commercial tenant/s] and to some extent the landlord “inherited” an unlawful tenancy.
- That said, the landlord did enter into a new arrangement with the tenant and has benefited significantly from receiving rent for premises he knew were not legally able or suitable to occupied as a residence.
- In those circumstances I award a rent refund of $13,000.00, approximately 50% of the rent paid by the tenant. The Agreement
- Under sections 13 and 13A a landlord must ensure that the tenancy agreement is in writing and provides certain specified information. For instance, the agreement must contain information concerning landlord’s insurance, insulation of the premises and a statement regarding healthy homes compliance. Failure to meet each of those obligations as an unlawful act which exemplary damages of up to $750.00 may be awarded.
- Clearly the landlord, did not meet those obligations and thereby committed an unlawful act in each instance.
- Where a party has committed an unlawful act intentionally, the Tribunal may award exemplary damages where it is satisfied it would be just to do so, having regard to the party’s intent, the effect of the unlawful act, the interests of the other party, and the public interest. See section 109(3) Residential Tenancies Act 1986. I note that it is the action that must be intentional, not the intent to act unlawfully, so ignorance of the landlord’s legal obligations does not preclude damages being awarded.
- The landlord says that he was entitled to regard the tenant as continuing to occupy the flat as sub-tenant of [the commercial tenant/s] so should not be required to document the tenancy in the usual way. With respect, that is now not how I view the evidence, which in my view shows the landlord knowingly entering into an agreement with the tenant for her to occupy the flat for residential purposes, for payment of rent. The landlord may have been unaware of his legal obligations when doing so but that is a different thing.
- Effectively, the omission on the landlord’s part in this context was in failing to recognise this as a residential tenancy and to document it accordingly. The evidence satisfies me that the landlord very much preferred to see the arrangement in commercial terms and not to take the responsibilities of a residential landlord, notwithstanding his receiving a significant rent for the tenant’s occupation of the flat.
- In my view, there would be a risk of penalising the landlord for the same omission if a separate award of damages for each breach was made. Instead, an award of the maximum damages payable for one breach is appropriate to recognise the comprehensive failure by the landlord to meet his obligation to appropriately document the agreement. Healthy Homes compliance
- Under s.45(1)(bb) a landlord must ensure that premises comply with Healthy Homes standards. Those standards specify minimum requirements for heating, draught stopping, moisture ingress, ventilation and insulation. They are intended to ensure that residential premises meet basic health standards.
- As this was a general tenancy with a commencement date of 3 February 2023, the date by which the premises needed to be compliant was 120 days after commencement.
- It is not disputed that the flat does not meet those standards. I have not been provided with evidence enabling me to assess the extent of non-compliance with each of the individual standards.
- By failing to provide premises that meet Healthy Homes standards, the landlord has committed unlawful acts for which exemplary damages of up to $7,200.00 can be awarded for each failure to comply with a standard.
- When considering whether to award exemplary damages for those unlawful acts, I take the view that failure to meet those standards is an omission different in nature than renting out unlawful premises. Healthy homes standards relate only to those 5 specified minimum standards, whereas before premises can lawfully be occupied for residential use, a range of other important criteria – fire protection and adequate infrastructure being obvious examples, first need to be met. Therefore, I do not believe there is a risk of doubly penalising the landlord for effectively the same acts or omissions, if damages are awarded for breaching Healthy Homes standards as well as rent having been rebated for the premises being unlawful.
- Given the likelihood that the premises did not meet any Healthy Homes standards but without evidence enabling me to analyse the shortcomings in detail, I take the same approach as in relation to the landlord’s failure to document the agreement, in awarding the maximum damages for 1 breach, to recognise the comprehensive nature of the breaches. Failure to maintain
- The tenant seeks compensation and/ or exemplary damages for what she says is the landlord’s failure to properly maintain the premises.
- The tenant’s allegation that the landlord expected her to look after all maintenance of the premises is consistent with the landlord’s preference to treat this as a commercial rather than a residential rental arrangement. It is however acknowledged that when the tenant raised with the landlord the need to repair the hot water cylinder, it was done.
- There is no evidence corroborating the tenant’s allegation that a range of maintenance/ repair issues were brought to the landlord’s attention but not addressed or that costs were incurred by her in meeting what ought to have been the landlord’s maintenance obligations.
- Concerns about the adequacy of the premises and its’ state of repair are appropriately addressed by the other awards made. Quiet Enjoyment/ Harassment
- Under s.38(2) and (3), “.....(2) The landlord shall not cause or permit any interference with the reasonable peace, comfort, or privacy of the tenant in the use of the premises by the tenant. (3) Contravention of subsection (2) in circumstances that amount to harassment of the tenant is hereby declared to be an unlawful act.”
- The tenant claims that the landlord interfered with her right to quiet enjoyment of the premises and harassed her and her guests.
- The tenant provided video footage which shows the landlord entering the flat, taking photographs while the tenant protested that he was not entitled to do so.
- The landlord had come to the flat to read the power meter but there is no dispute that the meter is on an external wall and could be read without entering the flat. The landlord says that he needed to take photographs for insurance purposes but that does not seem consistent with his assertion that he regarded these as commercial premises.
- The landlord says he entered the flat 6-8 times during the course of the tenancy, never without the tenant’s presence but without ever having given notice in terms of s.48.
- A witness gave evidence for the tenant. He had sound equipment stored with the tenant and visited the premises around twice a week until a generator was stolen.
- The witness’ evidence is that his generator was stolen after the gate had been left unlocked by the landlord. When he raised with the landlord why the gate had not been locked, despite the landlord’s own insistence that it be locked at all times, the landlord took it as an accusation that he had stolen the generator, was offended and threw some keys at the witness, hitting him in the face. The incident was reported to the police.
- The witness also spoke about regular incidents where, if the landlord was in a bad mood, he would find unreasonable things to complain about to the tenant or him.
- The tenant says that very often, when returning to the flat, which required her to walk down the driveway alongside the landlord’s business, the landlord would make unwelcome comments to her about what she had bought, on one occasion telling her it was a waste of money.
- The tenant was particularly upset by an incident the morning after what she says might be her last New Year’s Eve party, a special one organised by her friends, when she was confronted by the landlord while taking down some screens that had been put up on the fence to deter gate crashers.
- The landlord’s perspective is that he was simply being conversational with the tenant was she passed by and when appropriate, raised legitimate concerns about the tenant’s use of the premises.
- This is the tenant’s claim, and it is therefore for her to bring evidence to prove the claimed breaches by the landlord. The tenant’s perspective on the landlord’s intrusion into her right to quiet enjoyment of the premises is corroborated by the witness’ evidence about the landlord feeling free to let his displeasure at what the tenant and/ or her guests might be doing, being made known to them on the spot.
- It is clear that the landlord did not consider himself required to comply with the provisions of the RTA requiring notice of an intention to enter the flat. There is no evidence of his having entered in the tenant’s absence.
- The video footage does show what was a blatant interference with the tenant’s privacy, considerably exacerbated by the landlord’s insistence on taking photographs despite the tenant’s objections. While there is no evidence about police investigation into the incident even the uncontested evidence suggests the landlord’s response to the witness’ question about the gate being unlocked was quite disproportionate.
- I find it proved that on balance that on multiple occasions the landlord breached the tenant’s right to quiet enjoyment of the premises, by the unacceptable entry against the tenant’s wishes and taking photos, by failing to give due notice of intended visits the flat and by being unreasonably intrusive in dealing with concerns about the tenant’s use of the flat. I make a lump sum compensatory award equal to 2 weeks’ rent.
- I do not find the tenant’s claim of harassment proved. While I have found the landlord’s actions interfered with the tenant’s right to quiet enjoyment of the premises, “harassment” denotes a more serious pattern of conduct carried out against another person, designed to intimidate. The evidence persuades me of behaviour that was inappropriate and disrespectful of the tenant’s rights but not of an intentional harassment of her. Notice of Termination
- Under Section 60AA a landlord must not give a notice to terminate the tenancy or apply to the Tribunal for such an order, knowing they are not entitled to do so.
- Doing so without a reasonable excuse is an unlawful act for which exemplary damages may be awarded up to a maximum of $6,500.00. See section 60AA and Schedule 1A Residential Tenancies Act 1986.
- The landlord says that in giving the tenant the 90 days’ notice that the tenancy would end on 28 February 2024, he was really just letting her know well in advance, that the term of the Lease, under which he says she was occupying the property, was ending and that she would accordingly need to move out by then.
- I have found that the parties’ relationship is covered by the RTA. That being so, as a periodic tenancy it could only be ended by notice (by the landlord) in circumstances allowed by s.51. That provision requires that there be a valid reason for termination and that the reason is specified in the Notice.
- The Notice given by the landlord does not identify any such grounds for terminating the tenancy. The notice is therefore ineffective.
- Giving a 90-day notice of termination is not consistent with the landlord’s assertion that the lease with [the commercial tenant/s] was continuing, with the tenant as [the commercial tenant/s]’s subtenant. No such notice is required to end a fixed term commercial lease. I note though that the first term of the Lease ended on 1 February 2024, not 28 February 2024.
- Though he ought to have known, I am not persuaded however that when giving the termination notice, the landlord was aware that he was not entitled to give 90 days’ notice to end the tenancy without grounds. Section 60AA specifically requires that a landlord be aware that they are not entitled to issue a termination notice, before doing so constitutes an unlawful act. I do not find that awareness proved.
- Because has substantially succeeded with the claim I must reimburse the filing fee.