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Good News On Unlawful Rental Properties - 27th Nov 2017

Good News On Unlawful Rental Properties Here is a summary from NZPIF on the Anderson vs FM Custodians case.

Because of a previous High Court ruling on unlawful properties, the Tenancy Tribunal has been awarding tenants to have their rent refunded if they apply to the Tribunal saying their property is unconsented.
In the case of Anderson vs FM Custodians, The High Court ruled that the Tenancy Tribunal had no jurisdiction in hearing cases where the rental property was unlawful. The High Court ruled that the only section of the Residential Tenancies Act that the Tenancy Tribunal could use was section 137, which dealt with prohibited transactions.
The Tribunal interpreted the consequence of the prohibited transactions section that if a property was unlawful, then all money paid by a tenant should be refunded to them.
Dunedin landlord, Mr Vic Inglis, was taken to the Tenancy Tribunal by his recently departed tenant as the lower part of his rental property had aspects that were not consented. The tenant claimed that this was unlawful and meant that the dwelling was not a residential premises. The Tribunal ordered that Mr Inglis had to repay his tenant the entire $10,940 she had paid in rent while living in the property.
Mr Inglis appealed this decision to the District Court, where Judge KJ Phillips has just made a ruling on the matter.
The District Court judge ruled that "the definition of residential premises appears to apply to all properties intended for occupation. The definition does not raise the issue of legality".
Judge Phillips ruled that in the Anderson case, the High Court was primarily looking at whether the Andersons were squatters in their property. In his opinion, this aspect of the High Court ruling was binding on lower courts and tribunals. However any other matters in the High Court ruling were not binding.
Judge Phillips went further and said that "In my view, the decision in Anderson is not the wide-ranging decision that the Adjudicator in the Tribunal in this present set of circumstances (and Tribunals in other cases) have seen it to be".
This means that the Tenancy Tribunal does have jurisdiction to hear cases where a rental property is unconsented or unlawful and is not limited to section 137, restricting them just to refunding all the rent to applying tenants.
By having access to all provisions in the RTA, the tenancy Tribunal can use all aspects of the RTA when hearing cases regarding unlawful premises. Section 85 of the RTA says that "the Tribunal shall exercise its jurisdiction in a manner that is most likely to ensure the fair and expeditious resolution of disputes between landlords and tenants of residential premises."
Section 85 gives Tenancy Tribunal Adjudicators a directive to be fair in their decisions, meaning they can and should take into account extenuating factors such as the health and safety of the tenant and the value they received from their accommodation during their time occupying the property. 
The NZPIF had spoken to the Principal Tenancy Tribunal Adjudicator, Melissa Poole, about the District Court ruling. She said they are working through the decision but in the short time she has had access to the ruling, she believes it provides at least three points that will allow Tenancy Tribunal Adjudicators to step away from the Anderson case. 
She said that this will provide them with a strong position to take on cases of unlawful properties, meaning they can distinguish between the degree of unlawfulness and the degree of harm caused to tenants.
She said she would be getting out information to adjudicators as soon as she can which is excellent news. We will bring you this information as soon as we receive it from the Tenancy Tribunal.
However this does not mean that owners of unconsented rental properties are now completely risk free. It means that adjudicators can distinguish between the degree of unlawfulness in their rulings. If there are no health or safety concerns with the property, then it is unlikely an adjudicator will refund any of the rent paid, let alone all of it.
However if the adjudicator does believe that there are health or safety concerns for the tenant with the property, then they may make such an award. This could mean the property is in a poor state of repair, or there may not be any firewall between units of a villa conversion.
The following are steps that you may wish to take to ascertain if you are at risk from having an unlawful property.
1. Go to your local authority and check your consent carefully. Your property may be consented, however consider that unconsented work may have been done on the property since it was built and before you bought it. If the consent is correct, then no other action is required.
2. If you find that all or some of the property is unconsented, check whether the unconsented aspects would meet current requirements. If they do, apply for a certificate of acceptance.
3. If the property does not meet current requirements, employ a building consultant to advise you if it can be made to comply and what it would cost.
4. If it is feasible to make the property comply, undertake the work and apply for a certificate of compliance.
5. If it isn't feasible to remedy the property, then there is a risk that your tenant could make an application to the tenancy tribunal and you will have to pay them their rent back up to the Tribunals limit of $50,000.
The NZPIF has organised a meeting with the new Minister of Housing, Phil Twyford, to discus legislative changes to confirm how unconsented rental properties should be treated. We will inform you of future developments as soon as we can.

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