Published tribunal order
Tenancy Tribunal case 4955033 — Rent arrears at 234A Schnapper Rock Road, Schnapper Rock,
Decided 1 Oct 2024 · Published 1 Oct 2024 · Application 4955033
- Rent arrears
Party names are redacted in the official published order.
Order
- The tenants’ names and identifying details must not be published.
- The Bond Centre is to pay the bond of $2,520.00 ([Bond number suppressed]) to the tenants immediately
- Bowring Properties Group must pay [the tenants] $1,235.46 immediately, calculated as shown in the table below.
Reasons
- The tenants attended the hearing in person.
- Benjamin Vallings attended for the landlord.
- The tenants sought a rent reduction for the rent being substantially in excess of market value and compensation for alleged misdescription of the premises in respect to the Healthy Homes Standards.
- The landlord sought orders for rent arrears, the cost of advertising for new tenants due to the early end of the fixed term tenancy, and for rent loss due to reletting the premises for a lesser rent. Background
- The tenancy began on 25 September 2023 and was originally for a fixed term due to end on 30 March 2025.
- The landlord advertised the premises as a two-bedroom home: This inviting residence features two well-appointed bedrooms, providing ample space for individuals, couples or small families seeking a cosy retreat.
- The photographs produced at the hearing showed what was purported to be the second bedroom being used as a child’s bedroom.
- The landlord had recently before the tenancy created a small “second bedroom” by dividing off about half the pre-existing internal garage. In fact, the purported second bedroom had no windows, so could not legally be used as bedroom. .
- Under regulation 11 of the Housing Improvement Regulations 1947, all habitable rooms such as living rooms, dining rooms, sitting rooms, bedrooms must have windows for the admission of light and air. Similarly, under the Residential Tenancies (Healthy Homes Standards) Regulations 2019 (HHR), habitable rooms must be adequately ventilated, but the “bedroom” was not ventilated at all. Under the HHR, “habitable space” is defined as follows: habitable space means a domestic living space excluding any bathroom, laundry, toilet, pantry, walk-in wardrobe, corridor, hallway, lobby, clothes-drying room, or other space of a specialised nature occupied neither frequently nor for extended periods
- Just before the tenants agreed to rent the premises at the advertised rate, the landlord became aware that the second bedroom could not be legally advertised as a bedroom. He (responsibly) told the tenants that the room could not be used as a fulltime bedroom. (However, he did not know and therefore he did not tell the tenants that the purported bedroom could not be used as a habitable space so could not be occupied frequently or for extended periods).
- The tenants were aware that the advertisement was inaccurate to the extent the second bedroom could not be legally described as a bedroom but were not fully aware of the additional room’s full limitations and were feeling time pressure to find a place to live. They had liked the premises and decided to proceed with the landlord’s offer to rent the premises without asking for the rent to be reduced.
- The tenancy began and proceeded without great incident until June of 2024, when one of the tenants was offered a new work role in a different location, making the premises’ location unsuitable. So, in June 2024, the tenants asked the landlord to be released form the tenancy early.
- The landlord kindly agreed to that and advertised the premises for let. As is usual for a fixed term tenancy, the landlord expected the tenants to pay rent until replacement tenants were found.
- This time the landlord advertised the premises as one-bedroom, but suitable for up to four tenants, and (inaccurately) described the additional room as suitable as a guest room, hobby room, or office.
- Unfortunately, even despite the ongoing misdescription of how the additional room could legally be used, the landlord was unable to find any tenants prepared to rent the premises for $630.00 per week.
- Mr Vallings, however, (quite reasonably) told the tenants that he would not require tenants to top up the rent shortfall he would incur. The landlord also did not pursue a potential claim for the cost of water, albeit the premises do not have a separate water meter.
- However, the landlord’s difficulties in commanding the same weekly rent made the tenants suspect they had overpaid for rent.
- The landlord told the tenants that his previous tenant paid $630.00 per week in rent like them. However, the tenants spoke to the previous tenant who confirmed she had only paid $530.00 per week rent.
- Now, the immediately subsequent tenant was prepared to pay only $560.00 weekly rent including water.
- The tenants researched data for rent levels in the area that indicated comparable one-bedroom rentals in the area were in the $500s rather than the 600s. 1 The rent they had paid was comparable to rent data for a two-bedroom house, which indeed what the house had been originally advertised as. 1 Tenancy Services’ bond data indicates that for Albany, which is adjacent to Schnapper Rock, one- bedroom houses have a lower quartile of $466.00, a median rental of $498, and an upper quartile of $518.00. For two-bedrooms’ the upper quartile is $690.00. For two-bedrooms’ in Schnapper Rock, the bond data indicates the median is $600.00 and the upper quartile is $710.00.
Was the rent in excess of market rent?
- The tenants claim amounts to a claim that the weekly rent for the premises exceeded the market rent. Legal principles
- I briefly set out the legal principles.
- Section 25 of Residential Tenancies Act 1986 (RTA) relevantly provides: (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. (2) Notwithstanding anything in subsection (1), no application may be made under that subsection in respect of the rent payable under a fixed-term tenancy later than 3 months after— (a) the date of the commencement of the tenancy or (in the case of a tenancy that was subsisting immediately before commencement of this Act) the date of the commencement of this Act; or (b) the date of the last review of rent,— whichever is the later. (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.
- The tenant must prove on the balance of probabilities that the rent exceeds market rent by a “substantial amount”. The term 'substantial' is not defined in the RTA, but it is the opposite of ‘minor’ or ‘insignificant’. Some earlier Tribunal suggested a 'rule of thumb' of 10 per cent over market rent. However, a rule of thumb based on a specific percentage has no legal status and is not appropriate where rents rise at a rate significantly above income inflation.
- 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. These terms are not defined by the Act. The Oxford English dictionary defines willing among other things as: [H]aving a ready will; disposed to consent or comply; ready to do (what is specified or implied) without reluctance. [H]aving sound judgement; sensible ... not asking for too much ... not extravagant or excessive; moderate.
- The Tribunal may have regard to: [T]he 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”. Tenants’ application is excluded
- Although the substance of the tenants’ claim has merit, the Tribunal cannot entertain it because the tenancy was for a fixed term and under s 25(2) application can be made under s 25 in the case of a fixed tenancy “later than 3 months after...the date of the commencement of the tenancy”.
- It follows, the tenants’ claim for paying rent substantially in excess of market rent must be dismissed. Misdescription of the premises as complying with the HHS
- The tenants complain the landlord misdescribed the premises as complying with the HHS.
- The tenants were led to believe that the “second bedroom” could be used as a habitable space. However, the room could not be so used because it had no window.
- This claim can be viewed as a breach of the HHS as to ventilation and the Housing Improvement Regulations as to light and air or as a misrepresentation of them.
- If there is a breach of the HHS in a case such as this, there is a loss of amenity in the premises that should have existed.
- If there is a misrepresentation of a term of the contract that would substantially reduce the benefit of the contract, the affected party may be entitled to cancel the contract. If that term induced the innocent party to enter the agreement, then damages may also be available under s 35 of the Contract and Commercial Law Act 2017. A misrepresentation occurs when one party makes a representation to another party that the subject of the representation has a certain quality. For example, saying that a dishwasher was brand new, when it was second-hand. Discussion
- I The tenants used the room as a computer gaming room. One of the tenants used it for long periods of time, so it was used as a habitable room even though legally it was not..
- I am satisfied that the premises did not comply with the HHS as described. The so called “bedroom” was not even usable as a “habitable space”. There was a misrepresentation that the premises complied with the HHS when it did not.
- The tenants used the room as a habitable room so arguably suffered no great loss. However, the tenant who used the room was breathing air in small space without ventilation, which is not favourable to human health. Moreover, the tenants’ lack of knowledge about the room being unlawful to be used as a habitable room led them to pay a higher rental for the premises than they probably otherwise would have. If the premises had been correctly described, they probably would not have been so keen to rent the premises at the price they paid.
- The premises’ weekly rent was $630.00. The loss of amenity was not at the higher end of the scale. However, compensation should not be so slight as to be derisory.
- I consider the tenants’ loss of amenity can be calculated at about three percent of the weekly rent. I consider a weekly amount of $20.00 per week is apposite. The effective rent would then be $610.00. That does not unfairly penalise the landlord because it is still considerably more than the weekly rent of the preceding or succeeding tenants, for example. Conclusion
- The claim is proven. The landlord must compensate the tenants in the amount of $877.14 for the issues with the additional room. Rent arrears
- The landlord submitted a rent summary proving the rent arrears.
- Rent arrears are ordered as sought. Advertising cost
- The landlord’s claim for the cost of reletting the premises are modest and appropriate.
- This claim is allowed. Claim for rent loss
- After the Tribunal indicated it was minded to ordering compensation to the tenants for loss of amenity, the landlord confirmed he wished to be compensated for his loss of rent due to his new tenant paying less rent than the tenants had.
- Before the tenancy, the landlord set the rent on the basis that the premises was a two-bedroom house. It was in fact a one-bedroom house. The additional room was not a habitable room either, so its usefulness was more limited than the landlord thought even after he became aware it could not be legally used as a bedroom. Moreover, the premises’ additional room was misrepresented as being a habitable room.
- The tenants could not pursue their market rent application because it was out of time. However, if they could have pursued it, the claim would have had merit.
- I have ordered a reduction for loss of amenity of only $20.00 per week (effectively the landlord still received $610.00 per week), but that was based on the loss of amenity related to the HHS misrepresentation. If the market rent claim had not been excluded it is likely I would have found the market rent to be at the level the current tenant pays.
- Under s 85 of the RTA, the Tribunal must, “determine each dispute according to the general principles of the law relating to the matter and the substantial merits and justice of the case”. It would not be fair or accord with the substantial merits and justice of the case to compensate the landlord for lost rent when I am satisfied on the balance of probabilities that the rent the tenants were paying was in excess of the market rent which is probably the level of the current rent.
- This claim is dismissed. Bond
- The bond is to be returned to the tenants. Non-publication
- The tenants apply for non-publication of their identifying details.
- 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 substantially succeeded in their application. I do not consider that publication is in the public interest or justified by the tenants’ conduct or any other circumstances of the case.
- Non-publication is ordered.