Published tribunal order
Tenancy Tribunal case 4886031 — Property damage at 60 Elsie Drive, Waiuku, Waiuku 2123
Decided 13 Dec 2024 · Published 13 Dec 2024 · Application 4886031
- Property damage
- Cleanliness
Order
- [The tenant/s] must pay Port Property Management Limited - as Agent for Karen Wemyss $12,711.37 immediately, calculated as shown in the table below.
- The Bond Centre is to pay the bond of $2,200.00 (6246096-009) to Port Property Management Limited - as Agent for Karen Wemyss immediately.
Reasons
- The landlord attended the hearing on 19 November 2024 in person at Court. The tenant did not attend. The hearing was adjourned to clarify the various heads of claim.
- The second hearing was scheduled to be heard by telephone on 11 December 2024. During the call with the owner and the landlord, the tenant requested to be joined by telephone and participated in the short hearing.
- The landlord has applied for compensation for loss suffered as a result of methamphetamine contamination. The claim as presented totals $28,331.34. The landlord has provided a considerable volume of detailed evidence.
- The premises were tested for methamphetamine contamination prior to the tenancy, which started on 17 October 2020. The two composite sample test results were 0.19ug/100cm² and 0.04ug/100cm² (the latter result meaning nothing was detectable).
- The tenancy ended on 6 April 2024 pursuant to a 90-day notice of termination dated 8 January 2024. The reason for the termination notice was that the owner intended to market the property for sale.
- Methamphetamine screening on 8 April 2024 identified contamination. The results of a detailed assessment were reported on 18 April 2024. A methamphetamine level of 21.00 ug/100cm² was identified in the bathroom,
- 00 ug/100cm² in the hallway, and 133.00 ug/100cm² in bedroom 3. Such a high level is, as noted below, consistent with methamphetamine manufacture. Testing Costs
- Section 40(2)(b) of the Residential Tenancies Act 1986 (the Act) provides that a tenant must not use, or permit the premises to be used, for an unlawful purpose. The tenancy agreement provided that the tenant would not possess or take illegal substances into the property or allow any other occupants, guests, or invitees to do so, or use the property for any unlawful purpose.
- It is an offence under the Misuse of Drugs Act 1975 to manufacture, possess or use any controlled drug, or to knowingly permit any premises to be used for the purpose of consuming controlled drugs (sections 6, 7 and 12). It follows that methamphetamine use or manufacture at residential premises is a breach of section 40(2)(b) and an “unlawful act”.
- The tenant does not dispute that methamphetamine was used at the premises by a regular visitor.
- I find that there was a breach of the tenancy agreement and section 40(2)(b) of the Act. There was methamphetamine use at the property and the tenant is responsible for the actions of her visitors pursuant to section 41 of the Act. I award the testing costs totalling $5,829.35. Decontamination Costs
- Decontamination costs can be awarded if the property was damaged by methamphetamine contamination. A landlord must prove that damage to the premises occurred during the tenancy and is more than fair wear and tear. If this is established, to avoid liability, the tenant must prove they did not carelessly or intentionally cause or permit the damage. Tenants are liable for the actions of people at the premises with their permission.
- Where the damage is caused carelessly, and is covered by the landlord's insurance, the tenant's liability is limited to the lesser of the insurance excess or 4 weeks' rent. Where the damage is careless and is not covered by the landlord's insurance, the tenant's liability is limited to 4 weeks' rent.
- Tenants are liable for the cost of repairing damage that is intentional, or which results from any activity at the premises that is an imprisonable offence. This applies to anything the tenant does, and anything done by a person they are responsible for.
- Damage is intentional where a person intends to cause damage and takes the necessary steps to achieve that purpose. Damage is also intentional where a person does something, or allows a situation to continue, knowing that damage is a certainty (Guo v Korck [2019] NZHC 1541).
- In June 2017, Standards New Zealand published standard NZS 8510:2017 (the NZ Standard) for testing and decontamination of methamphetamine- contaminated properties. This adopted a standard of 1.5ug/100cm² for high use areas, for both manufacture and use. The foreword said that methamphetamine production and use can contaminate properties and expose occupants, particularly young children, to potential health risks. A post-contamination level of
- 5ug/100cm² or less was considered appropriate to minimize exposure risks, acknowledging “safety factors” already built into a risk assessment by Environmental Science and Research Limited in October 2016.
- Professor Gluckman, at that time the government’s chief science advisor, authored a report dated 29 May 2018 which concluded that methamphetamine levels exceeding the NZ Standard level of 1.5ug/100cm² “...should not be regarded as signaling a health risk”. The report said that exposure to methamphetamine levels below 15ug/100cm² would be unlikely to give rise to any adverse effects. Remediation to the 1.5ug/100cm² standard was appropriate for former meth labs and properties with high levels of methamphetamine contamination from excessive use. The report said that manufacture in general results in greater methamphetamine residue levels than smoking alone and concluded that “...levels around or exceeding 30ug/100cm² are regarded as strongly suggestive of manufacturing activity”.
- In Full Circle Real Estate v Piper [2019] NZDC 4947 the District Court had to determine whether the level of methamphetamine contamination would present a risk to human health. Where there is a risk to human health from such contamination, the property can be said to be damaged. The District Court said that the Gluckman report constituted the best available knowledge of the risks to human health from methamphetamine contamination. I interpret this case as confirmation that the Gluckman report is to be applied rather than the NZ Standard when determining whether there is damage.
- I find that the premises were damaged because they were contaminated at a level where there is a risk to human health. I find that there was a breach of section 40(2)(a) of the Act for which the tenant is responsible pursuant to section 41.
- The damage was intentional, because using drugs is an intentional act and the person smoking methamphetamine must know that contamination will be the result. I award the decontamination costs of $8,892.38. I also award the cost of commercial cleaning in the amount of $966.00 to remove the decontamination solution. Damage Caused by Decontamination
- The law provides that not all losses resulting from a breach of contract are recoverable. Some losses may be too remote. The damages should be such as may fairly and reasonably be considered as either arising naturally, that is, according to the usual course of things, from the breach of the contract, or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made their contract as the probable result of a breach (Hadley v Baxendale (1854) 9 Ech 341). This is an important consideration when addressing the remaining heads of loss.
- There is evidence that the decontamination process caused further damage to the premises. The insurance loss adjustor’s report dated 12 June 2024 referred to stains and marks to the walls and ceiling throughout the property as a result of the decontamination process. There was peeling paint on the windows in most rooms. The timber laminate flooring in the hallway, living area and kitchen had started to swell as a result of the decontamination cleaning. It was also noted that the bottoms of internal doors were swollen, and carpets and blinds had been removed “because soft furnishings cannot be decontaminated satisfactorily”.
- I find that the damage caused by decontamination was a loss resulting directly from the methamphetamine contamination. The decontamination process involved vacuuming, cleaning by hand all fixtures and fittings, and washing all remaining surfaces.
- Subject to an allowance for depreciation for some items, I award the repainting ($11,442.50) replacement carpet ($6,866.60) new wooden flooring ($6,868.32) replacement drapes and blinds ($4,735.10) and door replacement costs ($3,509.04) as claimed. Some electrical sockets were damaged by the decontamination process and these costs are also awarded ($260.45). Project Management, Travel Costs and Electricity
- The landlord claimed project management and contractor costs of $3,135.13. The owner explained that due to the size of the project, it could not be managed remotely. She did not have the expertise to manage the project herself, and she had to pay a contractor to project manage on her behalf. The project manager had to arrange for trades to carry out the work.
- I am satisfied that this loss resulted from the tenant’s breach of the tenancy agreement and that it was within the reasonable contemplation of both parties that a breach (for example, intentional damage to the premises) could cause the landlord to incur project management costs. The tenant knew that the owner did not live in Auckland and would not have the expertise to manage a large building project. Even a landlord who was living locally might reasonably need the assistance of a head contractor.
- The landlord claimed travel costs of $1,679.62 to inspect the premises post- decontamination (a table summarising these costs put them at $952.88). The owner had a property manager in Auckland as well as a head contractor managing the project. It was understandable that the owner wished to view the premises. However, this can also be seen as a function of being in business as a landlord living in a different part of the country. The cost could have been reasonably mitigated to an extent through photographs or videoconferencing. I decline to award travel costs.
- The landlord claimed the cost of electricity from June to September 2024 while the decontamination and renovation work was being performed in the sum of $469.35. The owner explained that, if the tenant had not damaged the property, she would not have been required to set up an electricity account and other utilities while the testing, decontamination and repair work was carried out.
- The tenant cannot be liable for these charges under section 39 of the Act, because they do not relate to the tenant’s use of the facilities.
- To the extent that the decontamination and remediation work used power, I would accept that these costs flow from the tenant’s breach and can be recovered as damages. The information available indicates that the decontamination process involved the use of a HEPA vacuum and air scrubbers and dehumidifiers. I award the electricity charges. Marketing Costs
- The landlord claimed “staging costs” of $1,667.50. These costs relate to the marketing of the premises for sale. The staging furniture was due to be delivered to the property on 11 April 2024. When the methamphetamine test results were received the owner explained that she had to stop the marketing. However, the truck with the furniture for staging was already packed and on its way.
- In my view, these costs are too remote in law to be recovered. The parties would not have reasonably contemplated such costs resulting from a breach when they entered into their contract. The tenant would not have known that the owner intended to sell the premises or to do so at a particular time. I decline to award these costs. Garden Work
- The landlord claimed $1,010.00 for work on the grounds. The owner explained that she would not have had to keep the grounds maintained while the house was vacant if the property had not been contaminated by the tenant.
- The exit inspection report on 9 April 2024 shows the grounds in a reasonably tidy condition. The landlord gave notice to end the tenancy. The tenant’s obligation was to leave the premises in a reasonably tidy condition, and in my opinion she did so. The landlord was always going to have to maintain the grounds during the marketing. This may have taken longer due to the tenant’s breach, but that is speculative. For these reasons, I decline to award the cost of maintaining the grounds after the end of the tenancy. Loss of Rent
- The landlord claimed $12,180.00 for loss of rent for the period from 8 April to 2 September 2024. The owner said the house was uninhabitable during this time. The weekly rent was $580.00. Insurers paid $11,680.00 of this amount, after deduction of the excess of $500.00.
- The landlord terminated the tenancy and was intending to sell the premises rather than rent the premises again. In my view, the tenant was liable for rent to the end of the tenancy, but not afterwards. I decline to award the insurance excess in relation to the loss of rent claim. Depreciation
- I have taken into account betterment and depreciation. The landlord should be returned to the position they would have been in had the tenant not breached their obligations. In calculating depreciation, I have taken into account the age and condition of the items and their likely useful lifespan.
- The premises were built in 1990. The carpets were installed in 2016 and the drapes in 2018. The carpets were 8 years old at the end of the tenancy. Based on an economic life of approximately 12 years, I award 33% of the amount claimed for carpet to allow for depreciation (a deduction of $4,531.96). The drapes were 6 years old at the end of the tenancy. Based on an economic life of approximately 8 years, I award 25% of the amount claimed for drapes to allow for depreciation (a deduction of $3,551.33).
- I decline to depreciate the wall painting and flooring replacement costs in this case. These are permanent fixtures which the landlord has had to replace prematurely at significant cost. Filing Fee
- The landlord’s application has been largely successful. I award the filing fee.