Property Management

Rent arrears end tenancies in lockdown

The Covid-19 crisis saw the introduction of emergency rules which make it harder to terminate tenancies, but a recent Tenancy Tribunal ruling shows that racking up rental arrears can still mean the end of a tenancy.

Wednesday, May 20th 2020

At the beginning of lockdown the Government introduced measures to amend the Residential Tenancies Act (RTA) and better protect tenants.

These measures include a provision which mean it is not possible to terminate tenancies during a period of three months around the lockdown, unless the parties agree or for one of a limited set of reasons.

Those reasons include substantial tenant damage to a property, assault or threats of assault from the tenant, anti-social behaviour, abandonment of the property, and being 60 days (up from 21 days) behind in the rent.

The new rules also specify that tenants who had previously been given notice could stay in their rental property if they needed to during the lock-down period.

When it came to rental arrears, if such a case made it to the Tenancy Tribunal, the Tribunal was tasked with considering fairness and whether the tenant is making reasonable efforts to pay the rent.

For landlords, there has been considerable concern around this particular provision as they feared tenants would stop paying rent – despite Housing Minister Megan Woods saying tenants must still pay rent.

These was also concern that Tribunal rulings around the emergency measures might favour tenants.

However, looking through recent Tribunal rulings it seems Tribunal adjudicators have largely been finding in favour of landlords in cases where there is 60 days of rent owing.

One recent Auckland case – which ended in a termination due to rental arrears during lockdown- is a good example of this.

Allan Tairua and Susan Felts-Mackay moved into a North Shore rental property, managed by North Shore Rentals Ltd, in February 2019.

Later in the year, the two stopped paying rent as they claimed there were defects in the premises, which the landlord did not remedy.

Tairua also claimed he had provided the property manager with a letter detailing the problems. However, he had not kept a copy of it and had no evidence of formally complaining to the landlord.

By the time, the landlord got a Tribunal hearing the country was still in level four of the lockdown and Tairua and Felts-Mackay owed $15,600 in rent.

Tribunal adjudicator, R Kee, found that the tenants were over 60 days in arrears and was not persuaded by the tenants’ claim that the property defects were so significant that the rent should be abated.

There was no documentary of photographic evidence of the problems, Kee noted. Further, the landlord was prepared to remedy any maintenance issues that were proven.

Kee also said the Tribunal had to consider other matters in considering whether the tenancy should be terminated.

“In relation to those further considerations, I find that the tenants are not making reasonable endeavours to pay the rent.

“The second factor [balancing the interests of the tenants and the landlord to see if a termination is not justified] is not reached. Therefore, there is no basis to refuse termination.”

For that reason, Kee ordered the tenancy be terminated and said the landlord’s application for rent arrears was established.

The tenants were ordered to pay North Shore Rentals Ltd $14,974.28 immediately, while the Bond Centre was ordered to pay the company $1,400.

Comments

On Wednesday, May 20th 2020 11:01 am Gabrielle said:

As a landlord the problem is that they got to $15,600 in owed rent. I would be in serious trouble if a tenant did that to me. My conclusion is that the Tenancy Tribunal ruled in this case in favour of the landlord but it was a really extreme case. Will they ever see that money anyway?

On Wednesday, May 20th 2020 7:38 pm Denise D said:

I am a private landlord and have just recently been through a telephone Tribunal hearing which ruled in my favour to grant eviction. My tenant owed $6,000 (well over the 60 days) in arrears due to a series of circumstances out of his control which was why I let it go for some time. I never felt at any stage that the judge was favouring the tenant due to the whole covid 19 problem - or is this considered an extreme case too. I have now sorted a repayment plan with the ex tenant and wish him well. Without knowing the full story, my problem with hearing about the $15,000 arrears is how on earth did a rental management company, who works for and gets paid to look after the house and sort these issues for the house owner, ever let this go on for so long. I think I will stick to my own management.

On Wednesday, May 20th 2020 9:45 pm Peter L said:

The reality is that the landlord will get the bond and nothing else. they can go whistle for the $14k Of course the landlord should have moved far quicker, as soon as the rent became overdue last year as it is an illegal act to withhold rent payments because of alleged defects within the property. The Tribunal has long held that property defects and non-payment of rent are two entirely separate issues and rental payment cannot be withheld due to that reason.

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