COMMON SENSE PREVAILS AS WE WIN THE BATTLE VS STUPIDITY

Posted on Thursday, November 14 2013

Many people have asked about a vital District Court case that we just won which has now set a precedent and will allow landlords of properties with 6 or more tenants on individual leases to once again obtain fixed term leases, without having to worry about the tenant being able to leave after giving 48 hours notice. It was an interesting experience as many people believed it was a losing cause and a waste of time and money, saying we should accept the change and move on, but I think after reading this you’ll struggle to see how landlords ended up in this ridiculous situation in the first place.

In 2010 the Residential Tenancies Act was amended to include Boarding Houses.

66BInterpretation for this Part
• In this Part, unless the context otherwise requires,—

boarding house means residential premises—
• “(a)containing 1 or more boarding rooms along with facilities for communal use by the tenants of the boarding house; and
• “(b)occupied, or intended by the landlord to be occupied, by at least 6 tenants at any one time
“boarding house tenancy means a residential tenancy in a boarding house—
• “(a)that is intended to, or that does in fact, last for 28 days or more; and
• “(b)under which the tenant is granted exclusive rights to occupy particular sleeping quarters in the boarding house, and has the right to the shared use of the facilities of the boarding house

66UTermination of tenancy by landlord
“(1)The landlord of a boarding house may terminate a boarding house tenancy—
“(a)immediately, if the tenant has—
“(i)caused, or threatened to cause, serious damage to the premises; or
“(ii)endangered, or threatened to endanger, people or property; or
“(iii)caused, or threatened to cause, serious disruption to other tenants; or
“(b)on 48 hours’ notice, if—
“(i)the landlord has, by written notice to the tenant, required the tenant to pay any rent in arrears within a stated period of not less than 10 days, commencing on the day the notice is given, and the tenant fails to pay the rent in arrears within the stated period; or
“(ii)the tenant is using the premises for an illegal purpose; or
“(iii)the landlord believes, having complied with section 66X, that the tenant has abandoned the room; or
“(c)on 14 days’ notice, if the tenancy is also a service tenancy, in which case section 53 applies; or
“(d)on 28 days’ notice, if no reason is given

“66VWhen tenant may terminate tenancy
“(1)A tenant under a boarding house tenancy may terminate the tenancy by giving at least 48 hours’ notice to the landlord.
“(2)A tenant need not give notice in writing.
“(3)If a boarding house tenancy is also a service tenancy, the requirement in section 53(1) that a tenant give not less than 14 days’ notice does not apply.

If one was to interpret this section literally without putting it into context then any landlord with a property that has 6 or more tenants on individual leases would be unable to secure a fixed term lease for longer than 28 days. It would also mean that tenants in these properties could be evicted on 48 hours notice, if they didn’t pay back their rent arrears within 10 days of being given notice or with 28 days notice – for no reason at all. The effects of such an interpretation would not only be disastrous for the Otago University student market but also for many other landlords and tenants across the country

However, considering that many residential rental properties fall under both the definition of a normal residential premise as well as a boarding house, basic legal principles should be applied to determine the meaning of legislation.

The meaning of an enactment must be ascertained from its text and in the light of its purpose and even where the meaning of any section and/or enactment appear to be clear, it should always be cross-checked against the purpose in order to meet the dual requirements of section 5(1) Interpretation Act 1999

The purpose behind the change was to protect vulnerable tenants who weren’t previously protected by the Act – Low income tenants living in low quality short term accommodation, while they try to find somewhere more permanent. This is what some politicians had to say about the amendment:

“It will cover those vulnerable people in boarding houses who are often transient, who are often on low, low incomes and who are very often in search of more formal and permanent accommodation. It is very important indeed to cover them while they are in boarding house tenancies.”
“The avowed aim of the amending legislation was to provide protection for the sort of people who take up tenancies in boarding houses – people who are transient, on low incomes, or perhaps temporarily there for short-term employment or while seeking more formal or permanent accommodation.”
“…that it is incredibly important that they come under the protection of residential tenancy law….they are filthy and disgusting in many cases and a number of them do not even have running water….our most vulnerable citizens rely on the Coalition to End Homelessness taking MPs around to show them the parlous state of boarding houses for action to be taken.”

Logic would suggest that the vulnerable people that Parliament are looking to protect are those having to stay in unsatisfactory low end boarding house accommodation while they wait on state
housing to become available, people fresh out of prison while they try to find suitable long term accommodation and the like.

If we use an Otago University student living in a studio room with 5 other people as an example. They look for accommodation for a defined period and are generally living in high quality accommodation with other students. They have always been protected by the Residential Tenancies Act. To suggest that they are part of the group of vulnerable people that the amendment is trying to protect is ludicrous.

Until recently it seemed that the amendment rightly wasn’t going to be applied out of context but that all changed after a decision regarding a boarding house tenancy was made by District Court Judge Broadmore in September last year.

From that point on tenancy tribunal adjudicators across the country would determine whether a property was a boarding house, purely on its physical characteristics without even taking the documentation or the purpose of the legislation into account – Apparently because they were bound by Judge Broadmore’s decision.

We still find it hard to believe that anyone actually read this decision as there are several instances where the Judge refers to the documentation being a key element in determining whether a property can be a boarding house or not.

For example:

“Essentially that was because the tenancy agreement included “Boarding House Rules” containing a provision enabling the landlord to terminate the tenancy on 48 hours notice. The inclusion of that provision….meant that the tenancy in question did not conform to the statutory definition of a fixed term tenancy.”
“As noted earlier, it was the inclusion in the boarding house rules attached to Ms Madden’s tenancy agreement of the provision as to 48 hours notice by the landlord which, in the Tribunal’s view meant that it was not a fixed term tenancy for the purposes of the Act.
In Paragraph 25 Judge Broadmore clearly establishes that it takes more than just physical characteristics of a property to determine whether parties have a boarding house tenancy agreement or not:
“The question is, therefore, granted that the property is both in terms of the documents and is accepted by Platinum Rentals, a boarding house, can the landlord hold the tenant to a fixed one year tenancy.”

Earlier this year, a tenant in a property we manage who shared a communal area with 6 others, decided she could move out by giving us 48 hours notice based on advice from tenancy services. We went to tribunal to settle the dispute. At the hearing we went through the negative consequences for both tenants and landlords if the tribunal was to rule in the tenant’s favour. We used the information previously mentioned to try and help the adjudicator put the amendment into context while also illustrating how ridiculous it was that a property with 6 tenants could be treated so much differently to a property with 5 tenants under the tribunal’s current interpretation of the law.

After several weeks we received the tribunal’s decision saying that it was out of their jurisdiction to supposedly go against Judge Broadmore’s decision.

The ruling of the adjudicator was sticking with the status quo. That alone was extremely frustrating as it seemed incredibly obvious that the status quo was wrong. Knowing the dire consequences of the decision, we decided that we had to appeal at District Court and even though there was a real chance of losing, we had to start somewhere and that was the next logical step. We didn’t argue that the legislation was wrong but rather that the current interpretation of it was wrong.

Seeing as we came out on top, naturally we’re going to say that we had a great judge and we knew we had the right person when after much questioning, he said that common sense would suggest that the property in question is not a boarding house.

Now, for those of you that own studio properties with 6 or more rooms and are currently paying commercial insurance because they define you as a boarding house, it may be worth using this decision to try and get your policy changed back to a residential policy – It will likely be to no avail but you never know until you try.

To take more of the decision making out of any tenancy tribunal adjudicator’s hands should you find yourself in a similar situation, it would be wise to add a new clause to your tenancy agreements – something along the lines of:

“Both parties agree that this is NOT a boarding house tenancy under Section 66 of the Residential Tenancies Amendment Act 2010”

If anyone would like to talk about this further or would like a copy of the District Court’s ruling then feel free to contact me.

 

By Matt Cutler Dunedin University Investment Specialist.

www.Cutlers.co.nz

Dunedin Property Investment Cutlers



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Expert's Bio

Matt Cutler

In 2005 while studying law, economics and history at Otago University, Matt started working part time as an assistant property manager. In 2006 a full-time roll opened up and he has been managing student properties ever since. In late 2011 Matt started selling University Investment properties and achieved record sales within the first 12 months. He has now developed a position as a respected advisor in the industry.

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