Published tribunal order
Tenancy Tribunal case 4936433 — Tenancy dispute at 21 Palmer Street, Aro Valley, Wellington 6011
Decided 22 Dec 2024 · Published 22 Dec 2024 · Application 4936433
Party names are redacted in the official published order.
Order
- The Tribunal declares that the market rent for the premises for this tenancy is $2,060.00.
- The weekly rent for the tenancy is reduced to $2,060.00 per week, commencing 17 July 2024 and continuing until 13 February 2025.
- The landlord must immediately pay the tenants $2,922.00, calculated as shown in the table below. DescriptionTenant Rent paid in excess of market rent 17/7 - 22/12/24$2,895.00 Filing fee reimbursement$27.00 Total award$2,922.00
Reasons
- I heard this application on Microsoft Teams by video link on 12 November and 19 December 2024.
- [Two of the tenants attended the hearing for the tenants at the first hearing. [Another two of the tenants] attended the hearing for the tenants at the second hearing
- Simon Cook attended for the landlord at both hearings. Introduction and issues
- The tenants are a group of young professionals who share the property, which is located in Aro Valley, and a 20-minute walk from the Cable Car in Downtown Wellington.
- The tenancy (or tenancies) in recent years has/have been well managed. There is a turnover of tenants, a consistent core group of tenants stay long-term, so the tenancy has a continuity about it.
- The house has seven bedrooms, and the rent is $2,165.00 per week. The tenants consider the rent is markedly too high.
- The tenants have applied for a rent reduction on the ground that the rent is not in line with market rent.
- Mr Cook opposes the application on procedural and substantive grounds.
- I consider the procedural challenge first. The landlord’s procedural challenge: what date was the contract agreed?
- The landlord submits that the tenancy began in 2021 and has continued ever since. The tenants cannot challenge the rent level because under s 25(2) of the Residential Tenancies Act 1986, “no application may be made under that subsection in respect of the rent payable under a fixed-term tenancy later than 3 months after...the date of the commencement of the tenancy”.
- However, the tenants say that the current tenancy was a renewal of the tenancy rather than an extension, so that this current tenancy commenced upon the renewal date of 13 June 2024 – the date they signed the tenancy agreement which is the date they inserted for the tenancy’s commencement.
- The main issue to be decided is: what date did the parties agree to the terms of the tenancy? If the parties did not agree to the terms of a fixed-term agreement extending before the previous fixed-term agreement ended, the latest agreement is a renewal rather than an extension.
- The previous fixed-term tenancy was due to end on 13 February 2024. Mr Cook emailed the tenants on 25 January 2024 offer to offer an extension of the fixed- term tenancy. His email set out how the offer was to be accepted, including relevantly: (______) Option 1: 1 year extension to (enter new end date) If you wish to extend, please sign and return this extension our office.
- On 25 January one of the tenants responded (copying the other tenants in). The tenant stated, “we would like option 1”. However, importantly that did not enter a new end date, did not sign the extension, and asked for a readable copy of the agreement: Hi there, We would like option 1. Also, as there is no form attached to this email, if possible it would be great if you could please send us a fresh form with the Option 1 details you have outlined above as a) as there are some people leaving and some new people joining the flat so that might be easier, and b) the old lease is a photograph of a scan, and some pages are not readable, so a fresh form where the terms and conditions are clear and can be read would be great. Is this something that can be arranged? Please call me if there are any issues, happy to discuss...
- The tenant’s email did not amount to acceptance.
- It was not until after the original fixed term had ended that the new fixed-term was entered into. The fact that the tenants negotiated some minor variations in the agreement after 13 February 2024 is consistent with the landlord’s offer not having been accepted on 25 January 2024.
- There being no acceptance on 25 January 2024, the fixed term tenancy ended and continued as a periodic tenancy. The latest fixed-term agreement is a new (or “renewed”) tenancy, not an extension of the previous fixed-term tenancy.
- It follows, the tenants’ claim is not procedurally barred under s 25(2). The market rent claim Introduction
- The house is a solidly built two-storey weatherboard and terra cotta roof-tiled house built perhaps in the 1920s. It is neither a villa nor a bungalow. It appears to have had significant quality renovations done to it perhaps about 25 years ago. It is a cut above in some respects. For instance, it has a marble staircase, and good quality joinery and fittings. Features like these and what appears to be an overall good design lend it a modest “grandeur” beyond a typical early-20 th century weatherboard house. The house has a well laid out 340m 2 floorplan. The house appears well-maintained in general. However, being an old house there is no lack small maintenance jobs that need to be done, and that will continue to be the case. 1
- The house’s amenities include seven bedrooms (one of these was originally a dining room), a small study that has been used as an occasional guest bedroom, an ensuite bathroom reserved to the occupants of the master bedroom, a main bathroom with toilet and a separate toilet shared by everybody else. It has a garage, a carport, and room for two other cars to park, which is quite a boon for a house in this built-up area.
- The section is quite small at about 350m 2 ,but the house is spacious at about 340m 2 . It is situated in a pleasant suburban neighbourhood.
- I am not a Wellingtonian, so I cannot safely surmise too much about the suburb’s characteristics. If I were to try and describe this suburb by comparison to my hometown of Auckland, I would hazard, it is bit like Kingsland or the city end of Parnell. The houses are mainly early 20 th century weatherboard construction. The sections are small, but the houses are solid. It is a gentrified suburb, and especially because of its pleasant environs, central location, and the house being well-built and well-designed, this house’s value will likely be towards the upper end for Wellington as a whole.
- The rent at the premises has been fairly stable since 2021. It was originally $2,205. In 2022 it was $2,100.00. In 2023 it was $2,165.00 and that is the rent now. Mr Cook says Wellington residential rent values have fallen in recent times. Legal principles
- Sections 25(1) and (3) of the Residential Tenancies Act 1986 (RTA) provide: (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 1 The tenants provided photographs showing defects at the premises need of repair or refreshment. 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.
- The Tribunal must answer three questions to decide the market rent claim: 2 a. First, what the market rent would be for the relevant premises. b. Second, whether the rent is substantially above the market value. c. And, if so, thirdly, what the rent should be.
What is the market rent for the premises?
- The test for market rent is the amount “a willing landlord might reasonably expect to receive, and a willing tenant might reasonably expect to pay for the tenancy”.
- The concept of the 'market' is constrained by the requirement that both parties be 'willing', and that the rent meets their 'reasonable' expectations.
- The factors the Tribunal may have regard to are “the general level of rents ... for comparable tenancies of comparable premises in the locality or in similar localities and such other matters as the Tribunal considers relevant”.
- Typically, the Tribunal receives evidence for comparable rents based on advertisements for similar premises in the locality. This evidence has its limitations. Although advertisements usually list the essential features of the property advertised, there is often limited detail available for comparison. Photographs help but must be treated with caution because photographs will be selective, can be doctored, and may not depict the warts-and-all reality. Also, advertisements only cover houses currently on the market and do not necessarily reflect the overall level of rents charged for existing similar tenancies in the area.
- The Tribunal commonly refers to the market rent statistics published by Tenancy Services. 3 These statistics record a summary of the general level of rents charged for tenancies where bonds have been lodged over the six months about a month prior. The statistics set out median or averaged figures for the lower quartile, median, and upper quartile rents suburb-by-suburb. 2 Property Brokers Hawke’s Bay Limited v Michaelsen [2024] NZDC 13815; and Fisken & Associates Limited v Lecole and Lecole [2023] NZDC 17698. 3 Approved in Property Brokers Hawke’s Bay Limited v Michaelsen [2024] NZDC 13815 at [21]-[23].
- Tribunal may also consider “such other matters as [it] considers relevant” to market rent. In Housing New Zealand v Hobman DC Lower Hutt, TT89/97, 27 November 1997, the Court said the other factors to be considered must be of the same kind as the preceding specified factors. It is arguable however that the term ‘other matters’ is broad enough to cover any anything relevant to the ‘reasonable’ expectations of a ‘willing’ landlord or tenant.
- The relevant date upon which to assess the market rent is the date this application was filed, 17 July 2024.
- A useful starting point to get a sense of what this house should be rented for is Tenancy Services’ bond data website. Landlords must lodge bonds for tenancies, so the data records the reality of what tenants are paying landlords to rent houses.
- In the case of Aro Valley data, there are data for four-bedroom houses, but not for 7-bedroom houses. In respect to four bedroom houses: a. For the period 1 May 2024 - 31 October 2024, the table shows an upper quartile four-bedroom average is $1,018.00 per week. b. For the earlier period of 1 December 2023 to 31 May 2024, the upper quartile for four-bedrooms average is $1,050.00.
- Averaging those two averages, the typical weekly rent for an upper quartile four- bedroom house per room in Aro Valley would be $258.00.
- The tenants provided advertisements for about 12 properties in the general area of Aro Valley. However, none of them was directly comparable to this premises.
- The most comparable house advertised was at 28 Koromiko Road. The house had at least six bedrooms, three bathrooms, and two off-street parks. The house is more modern than the premises and of comparable construction quality, albeit the construction is very different. This house has a lovely, elevated outlook, and is in a leafy location, but it is slightly further from the city, up a narrow, steep, winding road, and has about 100m 2 less floor area. Assuming six bedrooms were used, the room rate would be $275.00 per room; if seven rooms were used it would be $235.00 per week per room.
- A seven-bedroom house (a sleepout is the seventh bedroom) at 145 Aro Street was advertised for $1,715.00 giving a room rate of $245.00 per room, but that property is in poor condition and the sleepout room may throw calculations off.
- A house at 1 Holloway Road is advertised as having six-plus bedrooms for $1,500.00 per week. It has two bathrooms, two living areas, and six-plus off- street parks. Assuming six rooms, the room rate would be $250.00 per week. If seven rooms were used, the rate would be $214.00 per week. However, the house is not as good and is advertised as “would suit a student group’ whereas this premises would be better described as suiting a professional group.
- The landlord submitted an appraisal from an experienced property manager, Kevin Edmunds. Mr Edmunds calculated the market rent by extrapolating room rates charged for eight Aro Valley houses let either wholly or in part being: two 10-bedroom houses, one nine-bedroom house, one eight-bedroom house and four five-bedroom houses. Mr Edmunds arrived at a room rate of $250.00 for the premises. He then multiplied that amount by seven: the premises having six reasonably sized bedrooms, and a former dining room serving as a bedroom. He then added $200.00 for a room high in the eaves that had a “double” bed (the tenant who owned the bed said it was actually a single bed). He then added another $120.00 for the premises having four off-street parks including a garage.
- I accept Mr Edmunds basic approach but would assess the premises’ market value slightly different. The build and design quality is higher than almost every other property I have been presented with (the exception being an embassy- style residence). Therefore, I would apply a room value of $360.00. On the other hand, it is not unheard of for Aro Valley rentals to come with a least one car park. I would decrease the allowance of four parks to three parks (also at $30.00 per week). I would lower the value of the study/occasional bedroom, which is not intended to be used as a bedroom from $200.00 to $150.00.
- I calculate the market rent for the premises thus: 7 x bedrooms at $260.00:$1,820.00 Study/spare room at $150.00 $150.00 3 x more off-street parks than norm $90.00 $2,060.00
- It follows, the Tribunal finds the market rent for the premises for the current fixed term is $2,060.00 per week.
Is the rent substantially above the market rent value?
- The current weekly rent is $2,165.00, so is $105.00 per week more than the market rent.
- Whether that is a “substantial” discrepancy is an evaluative question. $105.00 strikes me as being a considerable amount. In the context of tenants choosing premises of this type to live in, a difference of $105.00 per week would have an impact on their decision making. Put another way, the tenants paid and are paying $105.00, or about 5 per cent more than they should be paying.
- It is an amount that will be significant to the tenants and to the landlord.
- I am satisfied that the current rent is substantially above the market rent for the premises.
What should the rent be?
- The weekly rent should be $2,060.00 per week. Orders
- The Tribunal orders that the weekly rent be reduced to $2,060.00 per week in line with market rent.
- The order shall take effect from the date of the tenants’ application, 17 July 2024, and continue in force to the end of the current fixed-term tenancy on 13 February 2025.
- The Tribunal orders the landlord to repay the overpaid rent to the tenants. Filing fee
- The landlord must reimburse the tenants for the filing fee. Non-publication
- The tenants seek non-publication of their names.
- The Tribunal must, on the application of a party that has wholly or substantially succeeded in proceedings, order that the party’s name or identifying particulars not be published, unless the Tribunal considers that publication is in the public interest or is justified because of the party’s conduct or any other circumstances of the case.
- The tenants have succeeded in their claim. Publication is not in the public interest nor justified by the tenants’ conduct or any other circumstances.
- The Tribunal orders non-publication of the tenants’ names.