Private property issue #45 - auckland floods

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Auckland’s floods have caused a wave of problems.

Not only have lives been lost and properties destroyed. It also raises many practical questions for property investors. You may be thinking:

• Can my tenant still legally live in the property?

• Do I need to reduce the rent?

• Can my tenant break the tenancy agreement and leave?

Note: While we’re specifically talking about Auckland’s floods, this info applies to all natural disasters. So this email still applies even if you are outside of Auckland.

Can my tenant still legally live in the property?

Without sounding too clinical, you first need to determine if your property is “uninhabitable”.

This has a special meaning under the law and comes from Section 59 of the Residential Tenancies Act.

This matters.

If your property is “uninhabitable”, your tenant can stop paying rent and leave with just 2 days' notice.

If your property is only “partially uninhabitable”, you need to lower the rent, but the tenant can’t up and leave.

What does “uninhabitable” mean?

If your property has been red or yellow stickered. It’s clearly uninhabitable.

But what if Auckland Council assessors haven’t been to your house?

Here’s the sticky part … there’s no definition in the Residential Tenancies Act … it’s not even in the Oxford English Dictionary.

So, we need to look at previous Tenancy Tribunal decisions to see how they define it.

What does the tenancy tribunal say?

Here are 2 examples of what the Tenancy Tribunal considers “uninhabitable”.

Case study #1 – watkin vs brazier property investments

Directly after the Canterbury earthquakes, the tenant’s home didn’t have power or water, and there was damage to the toilet.

Sounds like the property would be uninhabitable, right?

But, in this case, the judge ruled the house was not uninhabitable (i.e. it could still be lived in). Many people lived in homes without water and power directly after the earthquakes.

In their words: “The term ‘uninhabitable’ should … be interpreted according to the post-quake expectations of the community in question.”

Applying this to Auckland, if your rental property is partially damaged, you will need to decrease your rent.

But, your tenants cannot up and leave with 2 days’ notice unless the property is structurally unsound.

That’s because many people live in partially damaged properties right now (more below).

Case study #2 – harvie-selter vs woo jo

In this case, one of the property's bedrooms was extremely leaky. There was so much water the tenant even had to move the bed into the lounge.

The tenants tried to end their fixed-term tenancy agreement saying that the property was uninhabitable. But, the adjudicator noted that the tenants could still live in part of the property.

That means the tenants couldn’t use Section 59 to end the tenancy with 2 days’ notice.

Applying this to Auckland. If only a portion of your property is severely damaged, your tenants can’t just stop paying rent. But, you will need to reduce what they pay.

How would you apply this in Auckland?

I read a story from a landlord on Facebook on Monday. For him:

• He owned a 2-story house. The flooding had damaged the carpets on the bottom floor, including a rumpus room, laundry, and garage.
• Thankfully, the bedrooms, bathroom and kitchen were all upstairs and were undamaged.
• His tenants asked to cancel the tenancy agreement … or asked if he would pay for their temporary accommodation.

This landlord likely wouldn’t have to accept either. That’s because:

• Many Aucklanders face similar (or worse) troubles – like in the first case study.
• The whole house hadn’t been destroyed, only a few non-essential rooms – like in the second case study.

Instead, the landlord should do 2 things:

1. Try to fix the property as soon as possible, and

2. Negotiate with the tenants to reduce the rent to compensate them for not having access to the extra rooms.

To be clear – I am not saying that property investors should strong-arm their tenants into living in harmful conditions.

This email is to give you clarity about what the law says. You’ll need to interpret and apply this to your situation.

And if you need specific advice about your Auckland property, talk to your property manager.

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