Warning Bell Sounds Over Steep Rent Rises
A Tenancy Tribunal ruling should be heeded by landlords planning to hike rents this year.
28 February 2023
More than 74 per cent of landlords are planning to increase rents this year by at least 5 per cent and possibly more.
But this year it will pay for landlords to keep communication open with their tenants over rent rises, particularly as unemployment is expected to jump as the Reserve Bank intends engineering a recession.
While most landlords want their properties tenanted at market rent, this is sometimes regarded as excessive.
One landlord found himself in hot water with the Tenancy Tribunal for trying to get a 30 per cent rent increase to bring his property up to what he regarded as market rent.
The 30 per cent hike foisted on an Amberley, North Canterbury tenant was slashed by the Tenancy Tribunal.
In an unusual move, the tribunal decided the increase “to market rent” from $320 to $420 a week was excessive and cut it back to $370 a week.
The tribunal says it was at a loss to understand how landlord Rowan James Turnbull could consider a 30 per cent rent increase to tenant Julian Richards reasonable and justified.
Adjudicator J. Greene says the tribunal does not lightly interfere with rent charged, but section 25 RTA (which deals with market rent determinations) was enacted for a reason.
Market rent is defined as the rent that a willing landlord might reasonably expect to receive, and a willing tenant might reasonably expect to pay, taking into account the general level of rents for comparable tenancies of comparable premises in the locality. “Reasonableness is the key word in the statutory provision.”
Greene says he found the rent rise to $420 per week, later reduced to $400, exceeded the market rent by a substantial amount. “The property manager ameliorated that, but even then the rent at $400 per week still exceeded the market rent.”
Based on the evidence both parties produced, Greene found the market rent for the property was $370 per week; $30 less than the rent increase eventually settled on.
The rent increase took effect 60 days after the rent increase notice, so the period of time involved was about nine weeks and with the tribunal’s decision on fair rent, Turnbull was ordered to refund rent of $270 to Richards.
The tribunal says what the case between Turnbull and Richards illustrates is how one decision, possibly in hindsight ill-advised, to significantly raise the rent can destroy a landlord/tenant relationship that had previously been without issue.
Both parties agreed the landlord’s decision to raise the rent “to market rent” was the catalyst for all that followed.
“Often landlords give no thought to the consequences for a tenant of such a large rent increase,” Greene says.
In this case the rent increase was reduced to $400 per week after property manager Four Seasons Realty was hired by Turnbull, but by then the relationship had been
For Richards, this set in chain a process whereby he almost forensically looked at every perceived defect and repair issue, which before had not concerned him. He relentlessly emailed the landlord, his tone changed completely, he became demanding and, objectively viewed, unreasonable, in his dealings with the landlord,
This barrage of communications led to great emotional strain on Turnbull. Greene says it led to him believing the tenant would make constant demands for repairs in an effort to be as difficult as possible.
For both parties it led to stressful and time-consuming litigation and a two-day hearing in the tribunal, with all the preparation of the significant documentation produced and responded to; the accusations and counter allegations; and entrenching of positions.
Greene says he observed parties who each believed they had the moral high ground with each the aggrieved victim of the actions of the other.
“In fact, objectively viewed, neither party emerges as a blameless victim. The more considered position was that put forward by Four Seasons Realty, which was also dragged into what was essentially a dispute between Turnbull and Richards, triggered by the communication of a significant rent increase.”