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Abandoned Tenancy: What To Do

Abandoned Tenancy: What To Do

A reader asks our expert the best way forward when both tenants are taken away by the police and the tenancy abandoned.

By: Matthew Gilligan

30 November 2022

Q Earlier this year I rented a three-bedroom, one-bathroom house to a couple who were expecting a new baby. The tenancy was a fixed term for two years. I got a phone call from the neighbour telling me the couple were taken away by police. After maybe a day the woman was released but the man remained in custody. I received no further rent from the couple. I applied to the Tenancy Tribunal to terminate the agreement and get possession of the property. The female tenant has sent a text message saying they’ve moved all their belongings out, put the keys she got on the table and moved to her parents. I have a hearing date from the Tenancy Tribunal but it’s not for two months. My questions are:

1. Do I have to wait for the tribunal order to take possession of the house back?

2. Is there any quick way to get possession of the property?

3. What’s the right process to deal with the situation of tenants being taken away by the police?

4. How to contact the prisoner for the tenancy issues?

A Even though you had a fixed term tenancy with the tenants, it seems that their circumstances have changed, and they have now abandoned the tenancy. This seems apparent from the text message the female tenant has sent to you. It may pay to contact her and have her confirm that she has returned possession of the property to you. Although, on the basis that the tenants have stopped paying rent to you, notified you that they have moved their possessions out and left the
keys for you to uplift, you would be entitled to believe that the tenancy has been abandoned. Provided you are satisfied that this is the case, you should carry out an exit inspection and make a note of any damage or missing items.

You should advertise the property as soon as possible for replacement tenants. The tenants who have abandoned the property will be responsible for the rent until a new tenancy has commenced. Once you have a new tenancy in place, calculate what you have lost in rent and any other issues (damage, etc) and write to the tenants advising them of what they owe. If they don’t pay you, provide this information to the Tenancy Tribunal when you have your hearing. If for some reason you are not completely satisfied that they have abandoned the property you can apply to the Tenancy Tribunal for an expedited abandonment order. Provided the Tenancy Tribunal is satisfied with the information you provide (that the property has been abandoned) it should be returned to you within 10 days.

Your tenancy agreement should record that all tenants are jointly and severally liable. That means that both tenants are responsible. Provided you get confirmation that the property has been abandoned and possession handed back to you, you don’t need to worry about dealing with the male tenant if he is still in custody. It’s an unlawful act for a tenant to abandon a tenancy without a reasonable excuse so you should ask for compensation along with the rent arrears when you have your Tenancy Tribunal Hearing. - Ryan Weir

Q We paid a deposit to get a new build townhouse but it was back in April before gib shortages and CCCFA changes. Should I be worried about getting approved
for the rest of the mortgage?

A You should definitely find out where you stand now. With interest rates increasing this is reducing the borrowing capacity pretty quickly. Banks are currently testing
borrowers on interest rates of circa 8 per cent (this is what they are assessing on rather than actually charging) but I expect the OCR to increase by a further 1.75 per cent between the time of writing and early April next year. This is likely to mean that these test rates jump up and could be in the region of 9.5 per cent which will reduce your borrowing capacity further.

You are best to get approved for the remaining funds now. If for some reason you can’t then this at least gives you time to discuss with mortgage advisers and your solicitor about other options. - Kris Pedersen

Q I’ve read your book and been to one of your seminars. I got the feeling that you were very into land banking back then. Are there still opportunities to land bank in
today’s market?

A Land banking can still be a good strategy in this market, and the upcoming downturn with high interest rates will serve up some great buying opportunities. But you must focus on purchasing the right sorts of assets. Ideally, buy sites that have a holding income (ie existing house(s) that you can rent out in the meantime). Bare land that creates no income is expensive to hold. In the regions, properties affected by the new MDRS rules can be a great option. However, as with all property investment, you need to ensure you are buying in areas where there is high demand for more housing and a growing population. An example is Rotorua, which is a Tier 1 city getting MDRS up-zone earlier than other smaller centres.

Land banking is still also a good strategy for prime sites in Auckland. Again, pick the areas where there will be demand for the end product. Some suburbs of Auckland are already becoming saturated with developments of smaller townhouses. - Matthew Gilligan

Q I have purchased three residential apartments together using a company with genuine intentions to hold them as a long-term investment. Now I want to use one of them to test Airbnb (I may withdraw it at any time). Airbnb is a commercial activity, to keep it simple, I won’t register GST (for the turnover under $60,000 pa), I will account the other rentals separately.

Does the Airbnb tainted apartment have any tax implications? If I do need to sell it outside the bright-line, will I be liable for CGT?

A You have correctly identified that short-term letting is a taxable activity for GST. You have also correctly identified that you may remain unregistered where the turnover from that taxable activity is below $60,000. Despite being a commercial activity the bright-line and interest deductibility provisions extend to residential properties that can be used as dwellings even where they may not actually be used as dwellings. This means income tax will still be payable if the short-term let property is sold within its bright-line period. Interest will be non-deductible unless the property is a new build. In addition, if the property is used by guests and by the owners it falls under the mixed-use asset rules that limits deductibility of costs relative to nights rented as a percentage of total nights occupied. - Mark Withers

Q I’m having a dispute with my neighbour. My property is down the hill from them and every time they empty their pool my driveway and garden get flooded. Can I do anything about it?

A It is possible that your neighbour’s conduct has given you claims under a number of “torts” or civil wrongs. The most relevant torts in this situation are nuisance and the rule in Rylands v Fletcher. There could also be a claim in negligence. Before pursuing a claim you should first have your property lawyer check that your neighbour does not have an easement allowing him to do what he is doing. You should also attempt to come to an amicable resolution with your neighbour. Assuming that resolution attempts have been unsuccessful, you would need to pursue a claim in the civil courts. The most helpful remedy in this situation would be an injunction preventing them from causing further damage to your property. You could also seek damages to compensate your economic losses suffered as a result of their wrong (for example, costs to repair the damage done to your driveway and garden) Nuisance is the most commonly used tort in water escape cases. Causes
of action in nuisance are directed at situations where a defendant creates or permits a situation that causes or threatens continued or recurrent interference with their neighbour’s use or enjoyment of land. To make out a cause of action in nuisance, the defendant’s use of their land must be unreasonable. For a plaintiff to recover in nuisance, the harm that occurred has to be of a kind that was reasonably foreseeable as a result of the defendant’s act. Where an uphill neighbour discharges the water in a one off or infrequent incident onto their own property and it subsequently flows onto your property, causing harm to your property, you may have a cause of action under Rylands v Fletcher. In Rylands v Fletcher, the defendant built a water reservoir on his land which then leaked and caused damage to his neighbour’s property. This case set down a principle that a defendant will be liable where they bring something unnatural onto land and allow it to escape, isturbing the actual or prospective enjoyment of the neighbouring plaintiff’s rights over their respective land. Rylands v Fletcher, unlike nuisance, does not require a
wrongful act to be occurring on an ongoing basis. In this situation, that means that you may be able to get compensation where the uphill neighbour has emptied the pool, causing the flooding and damage, on only one occasion. As a final note, If the water is contaminated with certain chemicals, this may be a breach of the Resource Management Act 1991. - Shane Campbell