Published tribunal order
Tenancy Tribunal case 5119488 — Exemplary damages
Decided 17 Mar 2025 · Published 17 Mar 2025 · Application 5119488
- Exemplary damages
Party names are redacted in the official published order.
Order
- An application for suppression has been made in this case, and the Tribunal orders suppression of the tenants’ names and identifying details.
- Able-Thomas Property Management Services NZ Limited and Uriel Able-Thomas must pay Sesimellia Allen and Willie Allen $777.00 immediately, being compensation of $600.00, exemplary damages of $150.00, and the filing fee of $27.00.
- The Tribunal declares that the weekly rent for the tenancy of Sesimellia Allen and Willie Allen at 110 Bellbird Street, Papakura 2110, since the date of commencement is $750.00.
- The Bond Centre is to pay $200.00 from the bond to Sesimellia Allen and Willie Allen immediately.
Reasons
- Both parties attended the hearing on 12 March 2025. Background
- The tenant responded to a Trade Me advertisement offering the premises for rent for an initial contract of a year. The rent stated in the advertisement was: “$750.00 per week”. The advert said the bond was: “...4 x $750 = $3,000”. The property is large and has 4 bedrooms and 3 bathrooms.
- A viewing took place on 15 December 2024. The tenants applied for the tenancy without, at that stage, disclosing their poor credit history. When this was disclosed two days later, the property manager explained that the final rent would depend on their credit history as the landlord-owner would be taking a higher risk.
- The property manager also said the availability of Tenancy Costs Cover from WINZ would be taken into consideration. The property manager said their practice was not to reject tenants with less favourable credit histories, but to increase the rent slightly to “mitigate the risk”.
- On 19 December 2024 the landlord proposed a new weekly rent of $800.00 because of the poor credit history. The tenants advised that they agreed to this.
- On 21 December 2024 the tenants signed a residential tenancy agreement for a fixed term from 23 December 2024 to 26 January 2026 (2 years). A bond of $3,200.00 was paid and lodged.
- On 23 December 2024, the tenants applied to the Tribunal claiming exemplary damages. At the hearing the tenant also sought recovery of rent paid above the advertised rent of $750.00 ($50.00 for 12 weeks) and an order reducing the rent to that stated in the advertisement. Relevant law
- The Residential Tenancies Amendment Act 2020 introduced new provisions relating to advertising and rental bidding into the Residential Tenancies Act 1986 (the Act).
- A landlord must not advertise or otherwise offer a tenancy of residential premises unless the amount of rent is stated in the advertisement or offer (section 22F of the Act).
- A landlord must not invite or encourage a prospective tenant or any other person to offer to pay an amount of rent that exceeds the amount of rent stated in the advertisement or offer (section 22G). This does not prohibit a prospective tenant from offering to pay an amount that exceeds the advertised rent.
- The Tenancy Services website explains: From 11 February 2021, landlords cannot invite or encourage rental bidding when renting out a property. This law change is part of the Residential Tenancies Amendment Act 2020. Rental properties cannot be advertised without a rental price listed, and the rental price must be stated in advertisements or offers for the property. This does not apply to service tenancies. Landlords cannot invite or encourage prospective tenants to pay more rent for a property than is stated in the advertisement or offer. This means they cannot organise an auction over a rental property, or offer to give the rental to a tenant if they agree to pay more for it. Prospective tenants or any other person can still voluntarily offer to pay more than the stated amount of rent and a landlord may accept this offer. [Emphasis added]
- Breach of these obligations is an unlawful act for which the Tribunal may award exemplary damages up to a maximum of $1,500.00.
- Where a party has committed an unlawful act intentionally, the Tribunal may award exemplary damages where it is satisfied it would be just to do so, having regard to the party’s intent, the effect of the unlawful act, the interests of the other party, and the public interest (section 109(3) of the Act).
- Section 11 (Act generally to apply despite contrary provisions) provides: Any agreement or arrangement...that is inconsistent with any of the provisions of this Act, or that purports to exclude, modify, or restrict the operation of any such provision, shall be of no effect unless – (a) the inconsistency, exclusion, modification, or restriction is expressly permitted by this Act; or (b) the Tribunal is satisfied that, having regard to the nature of the tenancy, the provisions of the tenancy agreement, the interests of the parties, and all other relevant circumstances of the case, the inconsistency, exclusion, modification, or restriction should be permitted.
- A landlord must not require a bond of greater than 4 weeks’ rent (section 18(1) of the Act).
- A landlord may not require a tenant to provide any form of security for the tenancy other than a bond or a guarantee (section 18A(1)).
Was there a breach of the Act?
- As noted above, sections 22F and 22G of the Act were introduced by the Residential Tenancies Amendment Act 2020.
- The Select Committee report commented that these sections would “prohibit rental bidding” by specifying that a landlord must state the amount of rent when advertising residential premises and must not invite or encourage bids for rent.
- The Committee said that “Rental bidding can exacerbate affordability issues in the market because it leads to higher rents being paid for properties than originally advertised”. The Committee recommended excluding service tenancies from these provisions, because “there are no requirements in employment law for including the remuneration amount in employment advertisements”.
- The property manager provided a number of proposed definitions of “rental bidding”: ...a process where prospective tenants place bids on a rental property, similar to how one might bid in an auction... ...a practice where prospective home occupiers (tenants) are invited to submit offers higher than the advertised rental price for a property. This often involves a competitive process where interested parties bid against each other, similar to an auction, to secure the rental property.
- The property manager submitted that section 22G only applies to “rental bidding” understood in light of these definitions. Although this phrase was used by the Select Committee, the term is not included in the Act.
- The property manager submitted that, because no other prospective tenants were involved, and no one was invited to submit offers, what took place was not “rental bidding” and fell outside the scope of section 22G.
- Section 22G of the Act is titled “Landlord must not invite or encourage bids for rent”. On its own, this might indicate that only “rental bidding” of the kind described by the property manager is precluded. If that is right, section 22G does not apply, because the landlord did not invite bids from other potential tenants.
- In my view, the wording of section 22G(1) is wider than this. It says that a landlord must not “invite or encourage” a prospective tenant to offer to pay a rent which exceeds the rent stated in the advertisement or offer. A landlord might do this by seeking “bids” or offers from prospective tenants. However, it is not expressly limited to practices like auctions. As Tenancy Services note, the landlord cannot offer to rent the property to a tenant on condition that they agree to pay more than the advertised rent.
- On the evidence, I am not satisfied that the tenant voluntarily offered to pay more than $750.00 per week. The landlord assessed the tenant’s application and then offered to rent the property for $800.00 per week. In my view, that was to “invite or encourage” a prospective tenant to offer to pay more than the advertised rent in breach of section 22G. This is not altered by the fact that the tenant agreed and signed the tenancy agreement.
- The property manager submitted that section 22F of the Act does not preclude negotiation between the landlord and tenant about the rent, notwithstanding the rent stated in the advertisement. As a matter of contract law that is correct, because the advertisement should probably be viewed as an “invitation to treat” rather than an offer capable of acceptance. On ordinary contract law principles, there would be scope for negotiation, but these principles have been amended by sections 22F and 22G.
- In my view sections 22F and 22G together have a constraining effect on pre- contractual bargaining. Both provisions refer to the amount of rent stated in “the advertisement or offer”. This means the provisions are intended to apply to invitations to treat as much as binding contractual offers. In other words, the usual contractual distinction between invitations to treat and offers does not override these provisions.
- It could be argued that section 22F merely requires an amount for rent to be included in the advertisement. The observations of the Select Committee suggest that prospective tenants are entitled to assume that the rent stated in the advertisement will be the rent they have to pay. I consider that section 22G is consistent with this view and must be read in conjunction with the preceding section. It refers back to section 22F(1) and prohibits the landlord from inviting or encouraging any offers to pay more than the advertised rent. In other words, the advertisement must state the rent, and the only way this can be increased is if a prospective tenant (without encouragement from the landlord) offers to pay more (section 22G(2)).
- The property manager proposed an increased rent because of concerns about credit risk. This could be seen as a request for security for payment of the rent. I have considered whether such a request is contrary to section 18A of the Act, as being a form of security other than a bond or guarantee.
- “Security” is defined in section 18A as “any interest in real or personal property”, or “the power to exercise a right of the tenant, including the authority to cause an account to be debited...or the means to obtain money from a third party”. A request for payment of increased rent to manage the risk of a payment default does not readily fit within that definition.
- I find that the property manager breached section 22G of the Act but did not breach section 18A. Compensation and variation
- The tenants sought a declaration that the weekly rent is $750.00. They also sought compensation of $600.00 being the difference between the advertised rent of $750.00 and the agreed rent of $800.00 for 12 weeks since the tenancy began.
- It is relevant in this context that the tenants chose to sign a tenancy at an increased rent. I accept the property manager’s evidence that they were open and transparent about the need to adjust the rent in light of the tenants’ credit history. The tenants did not have to agree. Ex facie, the tenants are bound by what they signed.
- There was no indication in the evidence available that a weekly rent of $800.00 does not reflect the market rent for the premises. There has not obviously been a “substantially unequal exchange of values” to support relief for contractual mistake under section 24 of the Contract and Commercial Law Act 2017. The tenancy agreement has not been induced by misrepresentation or fraud (section 78(1)(g) of the Act).
- Sections 22F and 22G do not invalidate the tenancy agreement or provide a basis for the Tribunal to re-write its provisions, but I consider the difficulty for the landlord is section 11 of the Act.
- The tenancy agreement is inconsistent with the Act, in so far as it purports to restrict the operation of sections 22F and 22G. If the tenancy agreement were upheld at a rent of $800.00, it would effectively exclude the operation of those provisions because, notwithstanding the restraints on rental bidding, the tenant would be liable to pay more than the $750.00 advertised because of the same proscribed conduct. I find that the rent increase is of no effect.
- I award compensation of $600.00 and declare that the weekly rent is $750.00. The $200.00 of overpaid bond shall be refunded to the tenants. Exemplary damages
- The property manager has committed an “unlawful act” under section 22G. The tenant said she felt taken advantage of, because they needed accommodation urgently. In my opinion, the property manager was looking out for the landlord’s interests and believed he was entitled to negotiate a different rent. Ironically he might have been better advised simply to decline the tenant’s application for the tenancy. In my view, sections 22F and 22G constrain how much negotiation or adjustment to the rent there can be between advertising and signing a tenancy agreement.
- If I am right in my interpretation of these provisions, then the property manager was mistaken about his ability to increase the rent. I am satisfied that there was no intention to evade the operation of the Act. After the tenant brought her application, the property manager took legal advice and contacted Tenancy Services, in an endeavour to check that his actions complied with the law. He continues to believe that they did. I consider his view of the meaning and effect of sections 22F and 22G is one that a reasonable person might hold.
- I have considered the factors in section 109(3) of the Act. The tenants felt compelled to accept an increased weekly rental but could have chosen not to. To some degree at least, they contributed to their situation. There is a public interest in landlords complying with the rules around advertising and rental bidding, but this does not seem to be an egregious example of breach. The rent was adjusted upwards by less than 10% and for understandable reasons. I find that it would be just to award exemplary damages at a modest level. I award exemplary damages of $150.00 for the breach of section 22G.
- The landlord owner delegated responsibility for signing up new tenants to the property manager and was not involved. I make no order for compensatory or exemplary damages against the owner. Filing fee and suppression
- The tenant is awarded the filing fee and is granted name suppression.