Christchurch renters locked into leases in damaged but still habitable homes entitled to reductions

By Amanda Morrall

Christchurch renters tied into fixed-term leases in 'partially destroyed' but still habitable property may be eligible to seek relief in the form of rent reductions.

Insurance law specialist Duncan Webb, with Lane Neave in Christchurch, said provisions of the Residential Tenancy Act (RTA) gave renters more rights than they may be aware of. A key entitlement is the ability to request a rent reduction on properties where damage, direct or indirect, had been sustained since the time of the intial signing of a lease.

While section 59 of the RTA was open to interpretation, Webb argued that going without power and water for a prolonged period of time were reasonable grounds on which to ask for a reduction in rent.

"Where there is damage to the property but it is still habitable, there has to be a rent reduction to reflect in a fair and equitable way, the loss of amenities."

The amount by which rent could be reduced was more uncertain, he added.

"Because you can't plan for these things, there is no evaluation. So it's up to the parties to agree, or if they can't agree go to the Tenancy Tribunal to sort out what a fair reduction is."

Under current circumstances, Webb argued it was a matter that could be dealt with retroactively, if there were no agreement between the parties on what constituted fair rent.

In the case of commercial leases, Webb said some renters occupying damaged but still habitable buildings were unilaterally dictating the terms.

"They're making up their own mind about what's fair, reducing the rent and then saying, 'Well, if you don't like it, we can talk about it later.'"

Meanwhile, Civil Defence in Christchurch issued a warning Monday that the city is at increased risk of disease and vermin, due in part to abandoned properties.

Rubbish left in vacant houses, broken food containers and the amount of wastewaste going into the Avon and Heathcote rivers was to blame, authorities said.

Remaining residents were requested to put their neighbours' rubbish bins out for collection if they have left their homes.

Dialogue important

The Department of Building and Housing is encouraging landlords and tenants to maintain good relationships through open communication.

The Tenants Protection Association (TPA) in Christchurch is advocating the same but said tensions between landlords and renters were mounting.

In light of what's shaping up to be a scarcity of habitable residential properties, Chrichurch landlords have started putting up rents. The Tenants Protection Association told interest.co.nz last week that it was calling for rental freeze to ease financial pressures Cantabrians affected by the earthquake. (See article here.)

It is estimated that more than 75,000 Christchurch residents have left the city since the Feb.22 earthquake. It remains unclear how many intend to return.

Some insurers, facing claims by earthquake affected businesses, have tried to excuse themselves from responsibility on the basis of a 'depopulation.' The concept was employed by some insurers in New Orleans to stem the volumes of payable claims arising from Hurricane Katrina. (For more see Andrew Hooker's colum in the subject.)

RTA Act Section 59

59 Destruction of premises

• (1) Where, otherwise than as a result of a breach of the tenancy agreement (whether for a fixed-term tenancy or a periodic tenancy), the premises are destroyed, or are so seriously damaged as to be uninhabitable,—

  • (a) the rent shall abate accordingly; and

  • (b) either party may give notice to the other terminating the tenancy.

  (2) Where a landlord gives notice of termination under subsection (1), the period of notice shall be not less than 7 days.

  (3) Where a tenant gives notice of termination under subsection (1), the period of notice shall be not less than 2 days.

  (4) Where, otherwise than as a result of a breach of the tenancy agreement, the premises are partially destroyed, or part of the premises is so seriously damaged as to be uninhabitable,—

  • (a) the rent shall abate accordingly; and

  • (b) either party may apply to the Tribunal for an order terminating the tenancy, and the Tribunal may make such an order if it is satisfied that it would be unreasonable to require the landlord to reinstate the property or (as the case may require) to require the tenant to continue with the tenancy albeit at a reduced rent.

  Compare: Residential Tenancies Act, 1978-1981 (South Australia), s 71

  Section 59(1): amended, on 1 October 2010, by section 40 of the Residential Tenancies Amendment Act 2010 (2010 No 95).