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Associated person - there is no there there

Friday, March 13, 2020

Some concerns have been raised about the application of the associated person rule (APR) vis-à-vis 218-1’s infringement offence regime. More specifically, how the rule interacts with the two-tiered penalty system that fines landlords with 6 or more tenancies twice the amount of what it would a landlord with 5 or less. We are aware of some interpretations out there suggesting that the APR would capture all tenancies within the same whānau/extended family group. This is not the case.

It should be pointed out that the APR is distinct from the new definition of ‘member of the landlord’s and owner’s family’. The Bill specifically states that the APR is only applicable to provisions that relate to landlords with six or more tenancies. Generally speaking, the application of the APR relates to the infringement offence regime (see above). The new definition for 'member of the landlord’s and owner’s family' is intended to be applied to the termination provisions as relate to the landlord and/or his family moving into the property or being on the receiving end of anti-social behaviours. To be clear, the definition of ‘member of the landlord’s and owner’s family’ has no place in determining where an infringing landlord sits in the penalty tiering system (i.e. how many tenancies the landlord is deemed to have for the purpose of working out the applicable fine).

So what exactly does the APR capture?

For two individuals, you are an AP of a landlord if you are

  • a parent or a child of the landlord (see update below);
  • a spouse, civil union partner or de facto partner of the landlord;
  • a parent or child of the spouse (see update note below), civil union partner or de facto partner of the landlord

For an individual and a company, a company is an AP of a landlord and vice versa if the landlord is

  • a director or an officer of the company;
  • associated as an individual would (see above) to a director or officer of the company;
  • is directly or indirectly able to exercise control over the affairs of the company

For two companies, one is an AP of the other if

  • it is a holding company or subsidiary of the other within the meaning of section 5 of the Companies Act;
  • one owns or controls enough shares to exercise 20% or more voting power at the other’s meetings;
  • both have the same holding company within the meaning of s5 of the Companies Act;
  • if a third person owns or controls enough shares to exercise 20% or more voting power at each companies’ meetings.

While this piece does not seek to comment on the rightness or wrongness of the infringement offence regime, on the face of it, the APR seems to be a reasonable control in determining the true number of tenancies an infringing landlord has for the purpose of imposing the appropriate financial penalty. We remind readers not to be confounded by suggestions that the APR and ‘member of the landlord’s and owner’s family’ have a compounding effect on infringement penalties. That is simply false.

UPDATE 7th July 2020: The Social Services & Community Committee made a recommendation to remove references to parents and children in determining whether landlord A is associated with landlord B for the purpose of determining the appropriate level of penalty under the infringement regime. 

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