Published tribunal order
Tenancy Tribunal case 4783457 — Tenancy dispute
Decided 20 Mar 2024 · Published 20 Mar 2024 · Application 4783457
- Leaks
- State of repair
- 14-day notice
Party names are redacted in the official published order.
Order
- Name suppression is awarded in favour of [Tenant 1], [Tenant 2] and [The landlord/s].
- [The landlord/s] must pay [Tenant 1] and [Tenant 2] $1,760.00 immediately, as per the table below.
- The weekly rent will be reduced by $20 until the dishwasher is replaced or repaired.
- The tenant’s claim that the proposed rent is substantially in excess of market rent is dismissed.
Reasons
- Both parties attended the hearing.
- The premises are a 1960’s, brick and tile, two-bedroom, one bathroom house. The tenants live there with their two children.
- [Tenant 1] and [Tenant 2] claim that the landlord has breached their obligations under section 45 of the Residential Tenancies Act 1986 by supplying premises with a broken oven and by failing to fix a dishwasher.
- They also challenge a notice to increase market rent, issued on 18 October 2023, to take effect on 21 December 2023. They claim that the rent should not be increased because the landlord is proposing to increase the rent to substantially more than market rent.
- The landlord denies liability for the faulty chattels and claims that the proposed increase of rent from $540 per week to $595 per week sets the rent at the market rate for the premises. It alleges that the tenant has been underpaying the rent since 21 December 2023, with the consequence that $660 is owing for rent as at today because the tenants have continued to pay rent but only at the lower amount.
- I now turn to deal with the relevant issues. Has the landlord breached its obligations under s 45 of the Residential Tenancies Act 1986
- Under s 45 of the Residential Tenancies Act 1986, a landlord must provide and maintain the premises in a reasonable state of repair, having regard to the age and character of the premises and the period during which the premises are likely to remain habitable and available for residential purposes. A landlord must also comply with all requirements in respect of buildings, health, and safety under any enactment so far as they apply to the premises. 1 The oven.
- When the tenants first inspected the property there was an older looking oven at the property. The tenants were shown the property by a prior property manager. The tenants noticed the oven was older and asked if it worked. The reply was that “it should be working”.
- When the tenants moved in, they noticed the oven was not working. The external light in the oven would be on, but the inside of the oven would not work. 1 Section 45 of the RTA
- The tenants raised with the landlord (a prior property manager), who said that the oven was not part of the chattels referred to on the front page of the agreement.
- Eventually the tenants learned they had every right to ask for a working oven and issued a 14-day notice on 25 October 2023 in relation to the oven. This led to the oven being replaced on 18 November 2023.
- In the meantime, the tenants had to make do with the stove top. They are asking for compensation for being nearly two years without a working oven.
- The landlord says: a) The chattels list referred to on the front page of the agreement does not refer to an oven. So the landlord says that this is not included in chattels that were tenanted to the tenants. b) The owner says he told the tenants that the oven was not working from the outset of the tenancy and the tenants accepted that.
- When premises are supplied with items like ovens, they must be in working order. A landlord cannot exclude liability for repair of an item like an oven by declaring it not to be working at the outset of the tenancy or by not including it on the chattels list.
- An oven is a necessary item and it should be supplied in working order.
- In any event, I find that the tenants were told that the oven worked. I found the evidence of [Tenant 1] to be clear and reliable. I accept his evidence in this regard.
- I also find that the oven did not work for a period of some two years, until it was finally replaced on 18 November 2023.
- I consider it appropriate to award the tenants compensation for the lack of a working over in the overall sum of $1500. In fixing this amount, I take into account the fact that the tenants could have exercised their rights to issue a 14 day notice at an earlier point in time. The dishwasher
- I accept the tenant’s evidence that this stopped working late last year. The tenants asked the landlord to repair the dishwasher at that time. There was no satisfactory reply and so the tenants issued a 14 day notice on 12 December 2023.
- To date, the dishwasher remains faulty.
- The landlord has said that it is not liable to repair the dishwasher because it is not included as a chattel. Further the owner has said he cannot afford the repairs and that the dishwasher is not an essential item.
- The landlord essentially says: a) The owner has attended to a number of repairs that the tenant requested, including a security door, heat pump servicing and plumbing issues. This has all cost a lot of money and the owner has not been in a financial position to meet any additional expenses including the dishwasher. b) The dishwasher is also not referred to in the chattels list and also it is not an essential items. The landlord feels this is not an urgent item for repair.
- Once again, an item such as this which is included in premises must be in working order. It does not matter than it is not expressly referred to on a chattels list.
- The rent is to be reduced by $20 per week until the dishwasher is replaced.
- I award the tenants compensation for the lack of a working dishwasher at the rate of $20 per week from the date of the 14 day notice (12 December 2023) to today (approximately 13 weeks), being $260 in total. Market rent claim: Should the tribunal make an order that the rent exceeds market rent by a substantial amount?
- The premises are adjoined to a similar property of the same size on a cross lease title. Both premises are owned by the landlord and the landlord says the condition of the interior of the premises are the same, as is the size.
- The premises are self-contained and have a fenced yard. The house is 100 square metres in size. The section is small.
- The tenant’s claim that the proposed rent of $595 is well above market rent. They have produced a Tenancy Services print-out showing that: a) for a two bedroom apartment, the lower, middle and upper quartiles are $529, $585 and $608 respectively. b) for a two bedroom flat, the lower, middle and upper quartiles are $510, $545 and $550 respectively. c) for a house, the lower, middle and upper quartiles are $540, $580 and $621 respectively.
- The tenants say the premises are more in the nature of an apartment or flat because they are adjoined to [Address].
- They say the premises are dated inside and they submit the market rent is therefore at the lower end of the scale.
- The landlord says the premises are in the nature of a house, and that the adjoining tenants are paying $600 per week. [Online] listings of allegedly similar properties show a range of rents of what appear to be similar properties of $580. Other searches undertaken during the hearing showed properties with lower and higher weekly rents. Relevant law
- Section 25 of the RTA provides: 25 Market rent (1) On an application made to it at any time by the tenant, the Tribunal may, in accordance with the succeeding provisions of this section, on being satisfied that the rent payable or to become payable for the tenancy exceeds the market rent by a substantial amount, make an order reducing the rent to an amount, to be specified in the order, that is in line with the market rent. .... (3)For the purposes of this Act, the market rent for any tenancy shall be the rent that, without regard to the personal circumstances of the landlord or the tenant, a willing landlord might reasonably expect to receive and a willing tenant might reasonably expect to pay for the tenancy, taking into consideration the general level of rents (other than income-related rents within the meaning of section 2(1) of the Public and Community Housing Management Act 1992) for comparable tenancies of comparable premises in the locality or in similar localities and such other matters as the Tribunal considers relevant.
- In Fisken & Associates Limited v Lecole and Lecole ([2023] NZDC 17698), the District Court recorded that the Tribunal must first determine what the market rent is, and then decide if the current rent would substantially exceed it. Step one is therefore to determine what the market rent is. The Court stated: 2 That will require evidence. I recognise that truly independent evidence may not be available in a smaller district like Queenstown because the likely source of expertise is from real estate agents and property managers involved in the residential rental market who will generally act for landlords. However, rentals paid for comparative properties are objective facts which can be proven. It is only once a market rent is established that the Tribunal can decide whether the rent paid or payable exceeds it by a substantial amount. If it cannot be established an application under s 25 must fail.
- The term 'substantial' is not defined in the RTA. Some of the older Tribunal cases have suggested a 'rule of thumb' of 10% over market rent. Other adjudicators have said that this is not a helpful guide 3 because where rents increase at a rate above inflation, rent will eventually assume a greater proportion of household incomes. This will in turn reduce the availability of income for other household expenditure. In these circumstances, it is arguable that even a relatively modest increase over market rent could have a substantial effect. 2 At [29]. 3 For eg, see 4235532.
- The concept of 'market' rent is not completely unfettered. It is constrained by the requirement that both parties be 'willing', and that the rent meets their 'reasonable' expectations.
- Willing: The term ‘willing’ is not defined in the RTA. Relevant dictionary definitions include "having a ready will; disposed to consent or comply; ready to do (what is specified or implied) without reluctance" (Oxford English), and "done, borne or accepted by choice without reluctance ... of or relating to the will or power of choice" (Merriam Webster). Both dictionary definitions imply a readiness to do something without reluctance.
- Reasonable: This term is also not defined either. Dictionary definitions include "having sound judgement; sensible ... not asking for too much ... not extravagant or excessive; moderate" (Oxford English), and "not extreme or excessive ... moderate, fair" (Merriam-Webster).
- I consider that the Tribunal should have regard to (1) the general level of rent for comparable tenancies in the same or similar localities and (2) any other matter it considers relevant.
- Comparable rents: This usually involves comparing the premises to advertisements for similar premises in the locality. This approach has its limitations: although advertisements usually list the essential features of the property advertised (e.g. number of bedrooms, living rooms, bathrooms, garage etc.), there is often limited information to compare the relative quality and condition of the premises.
- In addition, the fact that a property is advertised at a particular rent does not necessarily mean the asking rent is 'market rent', even where a tenant signs an agreement to take the property for that amount. Section 25 RTA refers to the "rent payable or to become payable" exceeding market rent. So, a tenant could theoretically agree to pay an excessive rent, and then apply to reduce it in line with market rent.
- It is common for parties in Tribunal hearings to refer to the 'market rent' statistics published by Tenancy Services. The tenants in this case have indeed referred to these statistics in support of their case. They produced little other corroborating evidence of market rent.
- Other adjudicators have warned that the information in Tenancy Services does have its limitations. Rents can vary within the broad areas listed, and it can be difficult to determine where a property sits in relation the other properties covered by the statistics (although they do include 'median' as well as 'lower quartile' and 'upper quartile' rents).
- There is also a potential problem if rents are fixed primarily by reference to the Tenancy Services market rent statistics, as this has the potential to create a ‘positive feedback loop’ in which landlords increase rents in response to what other landlords are doing without reference to what is objectively reasonable.
- The Tribunal may also consider “such other matters as [it] considers relevant” to market rent. There is very little case law about what can be considered. In Housing New Zealand v Hobman (DC Lower Hutt, TT89/97, 27 November 1997) the Court said the phrase must be considered “ejusdem generis” with the words that precede it, i.e., additional factors must be similar to the previously listed factors relating to market rent. In that case the Court found that the phrase did not allow the Tribunal to take into consideration the tenant's personal circumstances (especially as this is specifically prohibited).
- It is arguable that the phrase is intended to cover any anything relevant to the reasonable expectations of a willing landlord or tenant. This could include factors such as a reasonable return on investment, and the rate of increase in relation to the consumer price index. A 'proper return' on investment was a factor that Rent Appeal Boards could consider when setting an 'equitable rent' under the Rent Appeal Act 1973 (a predecessor of the RTA). Although that wording was not carried over to s 25 RTA, it arguably relevant to reasonable expectations.
- Ultimately, the burden of proof is on the tenants to prove their claim on the balance of probabilities. Market rent claims are often difficult for tenants to establish due to the lack of quality evidence. Here there is evidence that the rent charged is broadly in line with other rents for similar properties and, although there may be a theoretical argument to the contrary, the tenant has not provided persuasive evidence that the rent increase exceeds market rent by a substantial amount. As such, applying Fisken & Associates Limited v Lecole and Lecole, the claim must fail.
- I find also that even if market rent was fixed at a lower rate, say the current rent at $540, I am not satisfied that the proposed increase, of $55 (about 10%) is substantially higher than that.
- Therefore, the claim is dismissed.
- I make no orders for refund of the filing fee because both parties have had a measure of success. Also, given that measure of success, both parties have name suppression awarded in their favour.