Published tribunal order
Tenancy Tribunal case 4961334 — Tenancy dispute at 18 Chelsea Avenue, Otahuhu, Auckland 1062
Decided 13 Nov 2024 · Published 13 Nov 2024 · Application 4961334
Landlord favoured
- Filing Fee
- Rent arrears
- 14-day notice
- Water Rates
Order
- Min Myo Maung and Cho Wah Wah Htike owes Barfoot & Thompson Limited - As Agent For Hasith & Sanjaya Gamage $3,809.38 (“the debt”), calculated as shown in the table below.
- Min Myo Maung and Cho Wah Wah Htike must pay rent and the debt as follows: a. By 76 weekly payments of $700.00, being $650.00 for rent and $50.00 for the debt. b. A final payment of $659.38, being $650.00 for rent and $9.38 for the debt. c. Payments will be every Sunday, with the first payment on 17/11/2024 and continuing until 03/05/2026.
- Payments will be allocated in the following order: rent, rent arrears, and the filing fee.
- If the tenant fails to pay rent and rent arrears within 2 working days of the due dates: a. The tenancy at 18 Chelsea Avenue, Otahuhu, Auckland 1062 will terminate and the landlord will have immediate possession of the premises. b. The balance of the debt will be payable immediately.
- If the tenant fails to pay the filing fee within 2 working days of the due date, the filing fee will be payable immediately.
Reasons
- The hearing was set down as a face to face hearing. The landlord attended in person. The tenant did not attend. The Tribunal called the tenant. Cho Wah Wah Htike appeared via telephone on behalf of the tenant. No reason was given for the failure of the tenant to appear in person.
- A Burmese interpreter was present at the hearing for the tenant however, the tenant advised that they did not require an interpreter and did not use the interpreter during the hearing.
- The landlord has applied for termination of the tenancy, rent arrears, outstanding water rates and reimbursement of the filing fee.
- Whether an order for termination can be made depends upon the level of rent arrears. There is disagreement between the parties about the quantum of arrears. Therefore, I deal with this issue first before turning to consider the issues of outstanding water rates and termination. Rent arrears
- The tenancy began on 3 June 2018 and was managed by the owner personally until 2024 when Barfoot & Thompson took over.
- Justin Coleman from Barfoot & Thompson appeared on behalf of the landlord at the hearing. Mr Coleman accepted that the owner did not manage the property professionally. The owner did not keep business records of rent paid by the tenant. Mr Coleman stated that the owner was elderly and suffering from ongoing health issues.
- Mr Coleman gave evidence that when Barfoot & Thompson took over management of the property, they conducted an audit of the owner’s bank account statements to produce an accurate rent summary. This was provided to the Tribunal and recorded rent arrears up to 4 November 2024 as $4,500.00.
- From the rent summary, it appears the tenant has missed a total of 13 payments of rent on the following dates: a. 03/11/2019 b. 10/11/2019 c. 22/03/2020 d. 31/01/2021 e. 18/04/2021 f. 24/10/2021 g. 02/01/2022 h. 27/03/2022 i. 24/04/2022 j. 05/06/2022 k. 25/09/2022 l. 06/10/2024 m. 31/12/2024
- Only three of these missed payments were ever brought to the attention of the tenant in a letter from the landlord dated 14 May 2022. In this latter, the landlord states that the tenant is in arrears of three weeks totalling $1,500.00. The tenant gave evidence that they paid $1,500.00 to the landlord to clear the arrears on 28 June 2022. This payment is recorded in the rent summary.
- The tenant states that other than the arrears recorded in the letter dated 14 May 2022, the landlord never advised them that they had missed any other payments of rent. Whilst the tenant accepts that they have missed two payments of rent in 2024, they dispute that they owe $4,500.00 in unpaid rent.
- The tenant claims that the rent summary is inaccurate. They say that if they owed $4,500.00 in rent, the landlord would have advised them of this sooner.
- Given the poor management and lack of communication by the owner to the tenant during the period they were managing the property themselves, it is understandable why the tenant might be surprised by the quantum of arrears produced in the landlord’s rent summary and question it.
- The tenant did not provide any additional evidence to support of their claim that the rent summary was inaccurate. They could have conducted an audit of payments of rent made by them and produced their own rent summary for comparison against the landlord’s, but they did not do this.
- In the absence of any evidence to the contrary, I accept submission of Mr Coleman that the rent summary is accurate and based upon an audit of the owner’s bank accounts undertaken by Barfoot & Thompson when they assumed management of the property. Mitigation of loss – rent arrears The law
- Section 49 Residential Tenancies Act 1986 provides that: Where any party to a tenancy agreement breaches any of the provisions of the agreement or of this Act, the other party shall take all reasonable steps to limit the damage or loss arising from that breach, in accordance with the rules of law relating to mitigation of loss or damage upon breach of contract.
- In Huang v Ashworth [2024] NZDC 15726, the District Court helpfully summarised the law regarding mitigation of loss in the context of the RTA as follows: [8] If either the landlord or tenant breaches the provisions of the tenancy agreement or the Act, the other party must take reasonable steps to minimise any loss arising from that breach. Accordingly, where the tenant fails to pay rent owing, there is an obligation on the landlord to mitigate the loss. This can be achieved by not allowing the arrears to continue to accrue, instead ending the tenancy and reletting the premises thereby preventing ongoing loss. [9] The rules that apply to mitigation of loss were described by Lord Haldane in British Westinghouse Electric and Manufacturing Co v Underground Electric Railway Co of London, as follows: [T]he law does not allow [a claimant] to recover damages to compensate him for his loss which would not have been suffered if he had taken reasonable steps to mitigate his loss. Whether a claimant has failed to take reasonable steps to mitigate is a question of fact dependent upon the particular circumstances of each case. [10] The learned author of Law of Contract in New Zealand puts it this way: The burden which lies on the defendant of proving that the plaintiff has failed in his or her duty of mitigation is by no means a light one, for this is a case where a party already in breach of contract demands positive action from one who is often innocent of blame. [11] Of relevance is s 55(1)(a) of the Act, which contains the power for a landlord to end a tenancy where rent is more than 21 days in arrears. In Housing New Zealand v Witika the landlord, Housing New Zealand, had allowed five months of arrears of rent to accumulate before it took steps to terminate the tenancy. In the Tribunal the adjudicator applied a “standard practice” of limiting rent arrears to 6 – 8 weeks on the basis that allowing rent arrears to accrue significantly beyond 21 days was indicative of a failure to mitigate loss. He awarded Housing New Zealand only $1760 of the $2256.43 arrears of rent claimed. In the District Court Judge Kerr overturned that decision. On appeal it was held that Housing New Zealand had acted reasonably in relation to the tenant given its position as the provider of state housing. It should not be restricted in its ability to recover the full amount of rent arrears on the basis of a failure to mitigate loss. Judge Kerr concluded: The learned adjudicator, as a matter of practice, seems to have dealt with claims for arrears by fixing an allowance of up to six weeks or two months worth of arrears as being the maximum allowable in any claim. In my view, that artificially creates a ceiling, which in terms of the principles relating to mitigation should not be created. If mitigation of damages is to be based on all the circumstances of the case and on the factual situation pertaining, then each case must be treated on its own merits, and to adopt a practice which may have the effect of tying an adjudicator’s hands in my opinion is not appropriate. [11] The Court held there is a duty to mitigate any loss by ensuring rent does not get too far in arrears. The test of what is required by the landlord to mitigate loss is a factual one that requires the Court to consider: (a) whether the landlord took all reasonable steps to mitigate its loss; and (b) more particularly, whether it acted reasonably having regard to all the circumstances of the case. [12] Judge Kerr avoided imposing an artificial ceiling on the amount of arrears a landlord can let build up but clearly indicated that there is a duty to mitigate when the rent goes into arrears. Application of law to the present case
- The rent summary produced by Mr Coleman shows that rent arrears totalled $4,500.00 on 4 November 2024. Of this, $3,200.00 accumulated between 2019 – 2023 before Barfoot & Thompson took over. During this time, the landlord took no steps to recover the rent arrears from the tenant.
- The fact that the owner did not pursue the tenant for rent arrears at the time does not stop them from seeking payment from the tenant now. See section 134 RTA. I am able to adjust the total amount of rent arrears if I find that the landlord failed to mitigate their loss, which I do.
- The only action which the landlord took to recover rent arrears between 2019 – 2023 was to send the tenant a letter on 22 May 2022 seeking payment of $1,500.00 in rent arrears. The tenant paid this on 28 June 2022. Other than this, the landlord took no further action and allowed rent arrears to continue to accumulate. In these circumstances, I do not consider that the landlord took all reasonable steps to mitigate their loss or acted reasonably in the circumstances. Therefore, I have reduced the rent arrears by $1,600.00, which represents half of the total arrears accumulated between 2019 – 2023. I consider this to be fair and reasonable. Water rates
- The landlord sought $1,764.76 in outstanding water rates. The landlord provided invoices from the water rates authority for this amount. These invoices were dated between 2022 – 2024.
- The property is one of two houses on the same piece of land. Before the land was properly subdivided in 2022, there was only one water meter for both houses. The landlord did not charge the tenant for water used during the period where the land was not subdivided (2018 – 2022). Once the land was subdivided in 2022, separate water maters were installed for each house. In a letter to the tenant dated 22 May 2022, the landlord advised the tenant that they would be charging the tenant for water usage moving forward. Notwithstanding this letter, the landlord never sent the tenant any water invoices. All water invoices dating back to 2022 – 2024 were sent to the tenant when Barfoot & Thompson assumed responsibility for management of the property.
- The tenant claims that the landlord never charged them for water usage. The tenant states that they have been paying their water invoices since receiving them from Barfoot & Thompson in 2024.
- The landlord states that they made it clear to the tenant that water usage would be charged in their letter dated 14 May 2022. The landlord states that the tenant has only paid a portion of one water invoice in 2024, but no others. The landlord accepts that no water invoices were sent to the tenant while the property was managed by the owner.
- Although the landlord may have agreed to not charge the tenant for water used before the property was subdivided, it is clear from the letter dated 14 May 2022 that the landlord intended to charge the tenant for water from this date forward. The fact that the landlord did not pursue the tenant for payment of water invoices between 14 May 2022 – 2024 when Barfoot & Thompson took over, does not stop them from seeking enforcement now. See section 134 RTA. A tenant is liable to pay for water that is exclusively attributable to the tenant’s occupation of the premises or use of the facilities. See section 39(3) RTA. It follows that the tenant is liable to pay for water used from 14 May 2022 until the end of the tenancy. Mitigation of loss – water rates
- The same principles regarding a landlord’s duty to mitigate their loss discussed at paragraphs [14] – [21] above apply to outstanding water rates.
- Between 14 May 2022 – 2024 when Barfoot & Thompson took over management of the property, the landlord did not send any water invoices to the tenant or take any steps to recover payment. It is no wonder that the tenant was surprised when the landlord sought payment in full of $1,764.76 in outstanding water rates.
- I find that between 14 May 2022 – 2024, the landlord did not act reasonably to mitigate their loss in respect of seeking payment of outstanding water rates by the tenant. Therefore, I have reduced the total amount of water rates claimed by the landlord in half to $882.38. I consider this to be fair and reasonable.
Should a conditional termination order be made?
- I have determined that the total rent arrears as at 4 November 2024 are $2,900.00 (31 days), taking into account a deduction for the landlord’s failure to mitigate their loss.
- The application was filed on 8 August 2024. Rent arrears totalled $2,435.66 ($4,035.66 as at 8 August 2024 according to the rent summary - $1,600 for failure to mitigate loss), which is 26 days.
- Where rent is at least 21 days in arrears on the date the application was filed, the Tribunal must make either a final or a conditional termination order. See section 55(1)(a) and (1A) Residential Tenancies Act 1986.
- I am satisfied the tenant will pay the debt within the period specified in the order and is unlikely to commit any further relevant breach. The arrears have accumulated from a missed payment here and there over the past 6 years of the tenancy. Overall the tenant pays their rent on time as evidenced by the rent summary.
- I consider the main reason that arrears have accumulated to the level they are now is because of a lack of action on behalf of the landlord in alerting the tenant to missed payments of rent and enforcing payment. Now that all parties are on the same page regarding the quantum of arrears and water rates, and the property is being properly managed, I do not think it is likely that arrears will accumulate in the future.
- I have granted a conditional termination order.
- The conditional termination order will lapse if it is fully complied with. If the tenant breaches the order, the possession order may be enforced for 90 days from the first breach. See section 64(4)(b) Residential Tenancies Act 1986. Filing fee
- Because Barfoot & Thompson Limited - As Agent For Hasith & Sanjaya Gamage has wholly succeeded with the claim I must reimburse the filing fee.