Time For Reform
Tenancy tribunal reform is required as debate over the Government’s proposal to abolish “no cause” terminations looms, argues Real-iQ director David Faulkner.
1 December 2019
The Tenancy Tribunal.
Everywhere I go on my travels around this great country, it is the one topic that always gets hotly debated, and there’s plenty of emotion that goes with the territory.
One thing is for sure, wait times are frustratingly long. Too long, and if the Government pushes through mooted reforms such as the removal of the 90-day no-cause termination notice, they are likely to increase further. That will be unacceptable.
With approximately 600,000 rental properties in New Zealand, there are a staggering 30,000 to 40,000 Tenancy Tribunal applications every year. Approximately 50% of them make their way to the Tribunal.
Who Makes The Applications?
Unsurprisingly, it is landlords who make the vast majority of the applications. In 2018 over 85% of all applications were made by the landlord. If you take away rent arrears, you start to get a picture that there is an equal amount of applications and disputes between landlords and tenants. So what can be done to speed up the process and improve the consistency of rulings?
This article is in no way a criticism or beat-up of the Tribunal, it’s more a recommendation as to how it can evolve. Is it too much to ask to get wait times down to two to three weeks? We believe that this is a possibility, but it will need radical thinking and change to make it happen.
So, without further ado, we look at a number of reforms that the Tribunal should undertake.
Removal Of Rent-Arrears Only Cases From Tribunal
Approximately 70% of Tribunal hearings will have a component of rent arrears. Let’s assume that over 50% of these cases are arrears only. If arrears only cases were taken away from the Tribunal, you would remove over one-third of Tribunal hearings.
Rent arrears cases are a complete of time for everyone involved. Typically, the tenant will not even turn up for the hearing.
An alternative solution is to make rent arrears applications remotely. On or after the 21st day of the tenant becoming in arrears you simply send the application through with possession and termination automatically granted to the landlord. The landlord would have to send evidence across to prove this is the case.
Rent statements, arrears notices, a copy of the Tenancy Agreement and an address for service for the tenant would likely be required. Under section 55 of the Residential Tenancies Act (RTA), the Tribunal shall make an order terminating the tenancy if the Tribunal is satisfied that the tenant is at least 21 days in arrears.
A remote adjudicator would ensure that the information is correct and write out the orders ending the tenancy and granting possession back to the landlord. Termination and a possession order will be granted to the landlord no later than 10 working days from the date of the decision.
This gives the tenant the opportunity to seek a rehearing if they can prove that there has been a substantial wrong or miscarriage of justice. This is clearly stated in section 105 of the RTA under Rehearings.
If the tenant can prove that this has happened, then a Tribunal date will be set within 10 working days of the original decision. Either way, you will limit the risk to the landlord to approximately five weeks’ rent arrears.
‘If rent-arrears only cases were taken away from the Tribunal, you would remove over one-third of Tribunal hearings’
Track And Measure Decisions To Improve Consistency
With so many Tribunal orders being made every day, to help improve consistency the decisions that adjudicators make should not only be monitored but also measured. With small data comes big opportunities and the Tribunal is no different.
It would be hugely beneficial for to measure their decisions against other adjudicators. It will also give clarity as to how adjudicators decide who is liable when a ruling is made against a property manager. Too often, we see rulings made against a property management company when they actually have done nothing wrong. Examples of this are around maintenance or non-compliant properties.
How Do We Do This?
It will be easy to track the performance of each adjudicator and compare their decisions. You will categorise each decision, for example: rent arrears; damages; cleaning; and exemplary damages; and you will be able to benchmark decisions based on case type, location and adjudicator. Such a system would identify any inconsistencies in decisions that adjudicators make. But, more importantly, we would have an excellent tool to educate not just adjudicators, but both tenants and landlords on what likely decisions the Tribunal will come up with on certain cases.
Allow Anonymity Of The Applicant
With the Privacy Act being talked about so much within our industry, it is time to ensure that applicants have the option to remain anonymous. Likewise, if you are the defendant and you have had no ruling made against you, there should also be the option to remain anonymous.
It is in the public interest to identify bad landlords and tenants. However if they have done nothing wrong or are a victim then is it really in the public interest to have them identified?
As an example, I have a family member who lives in Wellington and is paying a huge amount of rent for what can only be described as a slum. He has shown me pictures of mushrooms growing in the bathroom, rot, mould and damage to the property through fair wear and tear.
I have spoken to the occupants, explaining their rights. However, they are very reluctant to make a claim as they do not want this to hinder future applications for rental properties. I can well understand this as any prudent property manager or landlord will do a Tribunal search on applicants.
But tenants should be encouraged to take recalcitrant landlords to the Tribunal without fear of retribution or how it could impact their renting future.
Exemplary damages are out of date. Change them.
Many of the penalties or, as they are known under the RTA, exemplary damages, have not changed in nearly a decade. As rents have increased over the last 10 years, it would make sense that exemplary damages should increase as well.
These are also geographically biased. The median rent for Remuera is $730 yet for Gore in Southland it is only $260. Is it fair and reasonable that the landlord or tenant in Gore pays the same fine as the tenant or landlord in Remuera?
I believe that penalties need to be stiffer. Also, we need to take into consideration the amount of rent that is being charged when making decisions. Instead of having a fixed dollar amount, we believe a fairer system would be to base exemplary damages on a percentage of the annualised rental income. Stiffer penalties will ensure that landlords are more likely to maintain their properties and therefore we should see a reduction in applications by tenants over time. Bad landlords will be exposed and weeded out.
ABOVE Faulkner says there needs to be a system to track and measure adjudicators’ decisions to improve consistency.
Exemplary Damages For Wilful Damage To The Premises
Finally, it is unbelievable that a tenant can smash up a rental property and not face any exemplary damages or criminal prosecution. This is ridiculous.
I can go out into a street and smash up a neighbour’s car and I would rightfully face criminal prosecution. However, as a tenant, I can smash up a property and only be liable for the repairs. This is often a lot less than the true cost of repairing the property as adjudicators have to take into account depreciation.
‘Landlords need to have the ability to remove bad tenants quickly. They also should not need to obtain evidence from scared or intimidated neighbours to do so’
Tenants who wilfully damage the premises they are renting should also face sanctions and severe penalties through the Tribunal. Too often, the mental and financial strain that this causes to landlords is not taken into consideration. Tenants need to know that the consequences of such actions will hit them financially hard and this should prove to be enough of a disincentive to carry out such obscene behaviour.
If tenants are fully aware of this, then we should see less damage caused to property resulting in fewer Tribunal hearings.
The 90 Days "No-Cause" Termination What Shall Become Of It?
The proposal to get rid of “no-cause” terminations is the most hotly contested debate around the RTA reforms, now that this Government has announced them. With all the well-intentioned ideas that the Government has, the reality is that ideology alone does not always make good policy.
Safety must be the number one priority. Landlords need to have the ability to remove bad tenants quickly. They also should not need to obtain evidence from scared or intimidated neighbours to do so. Likewise, no property manager should ever have to tolerate abuse or threats.
If the Tribunal can guarantee that cases such as antisocial or agg essive behaviour will be heard and actioned against within seven days of an application, without the need to get statements or evidence, then we would support the removal of the 90 days no-cause termination. If they cannot do this, then the status quo must remain. ■