Are You Renting Out An Illegal Dwelling
On the 27th April 2017 at the Tenancy Tribunal in Dunedin, adjudicator Wilson made a ruling on a case that has sent alarm bells ringing and many think the ruling was grossly unfair.
The former tenant lodged a claim for a refund of rent after she found out that the property she was renting was not fully compliant. The landlord was oblivious that there was anything wrong. The property in question was personal and precious to the landlord. It had been the family home for 10 years. The property was in very good condition and the adjudicator acknowledges that the landlord made no attempt to avert Council laws or to exploit the tenants.
The problem arose when the tenant became aware that the downstairs part of the premises did not have a permit for the work undertaken to convert the space into living quarters.
What made the matter worse for the landlord was that the tenant only became aware of the issue when she sublet the downstairs part of the property without consent from the landlord. The landlord was completely unaware that the downstairs did not have council consent as he had not got a LIM report (Land Information Memorandum) when he purchased the property over a decade ago. This was the only mistake he made but what a costly mistake to make.
In a case that seems grossly unfair, a landlord had rented a property that was in a perfectly good condition to a tenant who had breached her agreement yet not only did she get nearly $11,000 in refunded rent, she pocketed over $3,000 from subletting the property without the consent of the landlord.
Is Tenancy Tribunal Like Playing Russian Roulette?
The landlord has appealed to the District Court so the decision may yet be overturned. However, we feel it is important to understand how the adjudicator came to this incredible decision and we also again provide evidence that going to Tenancy Tribunal can be like playing Russian Roulette.
This is what Wilson believes. Yes, the downstairs did not have a permit. But, does that make the entire property illegal?
The section adjudicator Wilson refers to in the Residential Tenancies Act is section 137; Prohibited Transactions. This eludes to the fact that you cannot enter into a contract that contravenes the provisions of the Residential Tenancies Act and that any money paid under the contract is recoverable to the tenant.
No. After finding out that the downstairs did not have consent the landlord approached the council and was able to obtain a Certificate of Acceptance which then made the property fully compliant. No additional work was done.
Yet Wilson states that the Code of Acceptance does not retrospectively make the tenancy lawful because the consent was not issued until two months after the tenancy ended. Therefore, in the eyes of Wilson, this was an illegal tenancy.
The decision did not sit well with the landlord who immediately applied for a rehearing. However, there were no grounds for this. Section 105 of the Residential Tenancies Act refers to Re-hearings.
You can only seek a rehearing on the ground that a substantial wrong or miscarriage of justice has or may have occurred. In the opinion of the adjudicator, this has not happened on this occasion. This is a matter for a District Court if the landlord chooses to appeal.
The question this case highlights though is how many illegal tenancies are there, and does this give the green flag for tenants to seek thousands of dollars in rent refunds as many rental properties could have similar issues?
Our advice is to ensure that you are fully aware of the obligations to provide the property compliant with all legislation and if you suspect that your property may not be compliant, get it rectified now, knowing the highlights of this Tribunal case.