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Wednesday, December 16, 2020

 

An example of how the Tenancy Tribunal weighs up a landlord’s and a tenant’s respective hardship in determining the merits of an application for early termination (of a fixed-term tenancy)

 

RE: Ayaz v Rentex Ltd [2020] NZTT North Shore 4278514

 

Facts
  • The tenant and his family moved to New Zealand in May 2020 and took out a one-year fixed-term tenancy from 20th June 2020 to 18th June 2021;
  • Tenant is a cybersecurity specialist with disabled children;
  • Despite planning to settle in Auckland (for a variety of reasons including support for his disabled son), the tenant had been unable to find a job;
  • In August 2020 the tenant found a job in Wellington and sought to terminate the tenancy with 4 week’s notice assuring the landlord that a friend would replace him and take over the tenancy;
  • Relying on the promise of a replacement, the landlord did not advertise for new tenants; 
  • In late September the proposed replacement fell through; 
  • The tenant paid rent to the landlord up until 8th October despite having relocated to Wellington in late September; 
  • The landlord had since re-let the property but is charging $20 less rent per week than the original tenancy; and
  • The landlord quantified a total of $3,808.57 lost in rent due to the lag between tenancies.

The law

 

s66(1) of the Residential Tenancies Act deals with an order for early termination. The adjudicator outlines the three key requirements for such an order:

  1. there is an unforeseen change in the applicant’s circumstances; and
  2. there would be severe hardship to the applicant if the term is not reduced; and
  3. the applicant’s hardship if the term is not reduced would be greater than the hardship to the other party if the term is reduced

s66(2) deals with reasonable compensation for loss or damage a reduced term would have on the other party if the Tribunal is to order an early termination.


 

Analysis

 

There are two issues to consider: 

  1. Whether the hardship on the tenant if the tenancy is left to run its course would be greater on the landlord if the tenancy is terminated early; and
  2. If so, how could the landlord be reasonably compensated for the loss incurred by early termination? 

 

On the first issue the adjudicator considers: 

  • The tenant’s preference to settle in Auckland on account of the locally available support for his son and that had there not been a genuinely unforeseen change in his circumstance (i.e. lack of job opportunities) he would have stayed in Auckland;
  • The severity of financial hardship the tenant would be under if he is to continue paying double rent until June 2021 or remain in Auckland without a job;
  • The landlord’s financial urgency to make mortgage payments (i.e. keep vacancy at a minimum); and
  • The hardship on the landlord for having lost $3,808.57 of rent by the time of the hearing as well as $20 per week for the remaining 30 weeks of the fixed-term tenancy.

and arrived at the determination that the tenant would suffer greater hardship if the tenancy is not terminated early than the landlord would if the tenancy is terminated early. 

 

Having arrived at this conclusion, the adjudicator then turns to what would be reasonable compensation for the landlord in this instance. The adjudicator considers:

  • That the tenant had initially given 4 weeks’ notice to terminate and continued paying rent until 8th October; and
  • That had the tenant not nominated a friend to take over the tenancy, the landlord would have advertised for new tenants earlier than she did.
and considers the equivalent of 4 weeks' rent in lieu of notice (in addition to the tenant's other notice) to be adequate compensation.

 

Interestingly the adjudicator does not acknowledge the $600 projected rent lost (being $20 less rent per week for the remaining 30 weeks of the tenancy) as part of her calculation for reasonable compensation. 

 

Outcome

The Tribunal ordered the tenancy to terminate early on 8th October 2020 and the landlord is compensated $2,480 (being the equivalent of 4 weeks’ rent).

 

Take-home for landlords
  • Be wary of entering into a fixed-term tenancy with tenants who are not firmly rooted in the community (in this instance, the tenant had just moved to Auckland and not yet secured a job); and
  • S66(2) compensation is intended to be restorative and not to enhance the landlord’s original position.

Overall helpfulness scale (Because let's be honest, Tribunal decisions can be a bit of a mess but still, landlords and tenants need all the help we can get!)
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