JANICE & OLIVIA COWDY
And suddenly it’s summer again! It’s hard to believe that Olivia has been on the team for a whole year now, but it’s great to have her on board. Cowdy & Co is a family business, through and through, and it’s so exciting seeing the next generation grab the opportunity to work so closely with the Christchurch community.
2016 has been a very interesting year – in many more ways than international politics and shifting tectonic plates would imply. Because we’re both committed to property management, we’ve seen a significant shift in the landscape for tenants and landlords with a number of fairly controversial judgements from the Tenancy Tribunal level right up to the Court of Appeal.
The most significant of these cases is what’s now known as the Osaki case, and it has widespread implications for everyone involved in residential property. It’s such a significant case that we’ve dedicated quite a few column inches over the page, with an in-depth look at what it means for tenants and landlords alike. If you only read one thing in this newsletter, that’s it.
In addition to these challenging nationwide changes, the rental market locally in Christchurch has definitely slowed down now that there are a lot more options for tenants than in previous years.
There’s quite a lot of available stock, and we’re working extra hard to move our properties as fast as we can. Adopting a pragmatic approach such as realistic pricing and creating a new viewing portal is helping us stand out from our peers.
The new viewing registration portal on our site makes it easier for people to register for times or request new times and helps us make sure we get all prospective tenants through the property. Check it out at www.cowdy.co.nz
We’d also like to welcome Franco Dal Din who recently joined the Cowdy & Co team in residential sales. His profile is found inside this edition, and he’s looking forward to working with our loyal clients.
We hope you get the chance to get some relaxing in over the holiday season and we’re hoping for a happy and settled 2017 for everyone!
It’s been an interesting year for residential landlords, with lots of changes to Tenancy Services and how the Tenancy Tribunal operates. But, perhaps even more interesting than these changes, is the fall-out from the long awaited Court of Appeal decision on Holler vs Osaki on the liability of residential tenants, which was handed down in April this year.
The implications of this judgement are far-reaching, especially for landlords. So we’re going to take some time to explain it here as best we can.
What is the Osaki case?
The landlords (Mr Holler and Ms Rouse) in this case owned a house rented to Mr Osaki and his family. The landlords had insured their investment property with AMI Insurance.
In 2009, Mrs Osaki left a pot of oil on high heat unattended for a few minutes. A fire broke out and caused extensive damage to the house. The landlords made a claim under their insurance policy and AMI funded repairs to the tune of just over $215,000.
So far, so good.
Things got complicated when AMI went after the tenants for the cost of this damage using the subrogation clause in their insurance policy with the landlords. Subrogation essentially means that the insurer can pursue the tenants for the cost of the damage in the name of the insured landlords. This is why the case is known as Holler v Osaki (not AMI v Osaki).
The tenants defended AMI’s claim on the basis that sections 268 and 269 of the Property Law Act 2007 (“PLA”) allowed them to rely on and be protected by the insurance policy the landlord held.
This is where things get interesting.
In essence, these sections of the PLA mean that a landlord can’t require their tenant to meet the costs of repair or pay damages when a landlord has insurance specifically designed to cover that damage.
The general idea here is to stop landlords forcing tenants to pay for damage directly and therefore avoid making a claim on their insurance policy. Making a significant claim on any insurance policy is likely to increase the landlord’s insurance premiums in the coming years.
But AMI argued that these clauses in the PLA only related to commercial leases, not residential tenancy agreements (as was previously understood based on other cases). AMI instead pointed to section 40 of the Residential Tenancies Act 1977 (RTA) where tenants agree that they will not intentionally or carelessly damage or permit anyone else to damage the property as part of their residential property agreement. AMI claimed that Mrs Osaki’s carelessness caused the damage, and as such, they were entitled to compensation for the costs of the claim from the Osaki family.
That meant that this case was all about how the two different pieces of legislation intersect and whether the presence of appropriate insurance held by a landlord means that any tenant (residential or commercial) is off the hook for damage caused by carelessness.
This case first went to the Tenancy Tribunal, then appealed to the High Court, then appealed again to the Court of Appeal. The judgement was handed down in April this year in favour of the tenants – AMI’s appeal was dismissed.
Question: Whether residential tenants are immune from a claim by the landlord where the rental property suffers loss or damage caused intentionally or carelessly by the tenant or the tenant’s guests?
Answer: Yes, in terms of loss or damage caused carelessly, to the extent provided in sections 268 and 269 of the Property Law Act 2007 but no, in terms of loss or damage caused intentionally.
So, to summarise, the Holler v Osaki decision essentially provides protection to tenants for damaged caused accidentally, or even through negligence, PROVIDING the landlord has insurance to cover that damage. It essentially stops landlord’s insurers “double dipping” by first paying the claim, then pursuing the tenant to recover those costs.
This judgement appears to make sense when the case is of significant value. Seeing an insurance company pursue a private tenant for hundreds of thousands of dollars to cover a risk they already accepted does seem unfair. And in those rare situations such as Mrs Osaki’s carelessness, providing some protection to her family from the insurer is probably a good thing.
But it’s the implications of this judgement on the thousands of much smaller disputes between landlords and tenants that has people very worried.
It affects cases that relate to hundreds of dollars worth of damage, not tens of thousands – cases like damage caused to carpets by pets or children that are the typical, everyday claims that the Tenancy Tribunal deals with. Cases where the cost of the damage falls under the landlords insurance excess, creating a situation where no claim on insurance can be made.
Take a recent Tenancy Tribunal decision involving damage caused by a tenant’s dog. Despite the fact that there was a strict no pets clause in the tenancy agreement, the tenant allowed her dog to urinate and defecate in every room in the house, causing extensive damage to the carpet, which had to be replaced.
The landlord’s insurance company said that each identifiable instance of damage would count as a separate claim, and the same applied with each room. With at least 10 separate spots of damage in each room and an excess of $500 per claim, the total excess would be $25,000, thus making a claim pointless for the landlord.
But because the Tenancy Tribunal must follow the decision on Osaki, they ruled that the tenant was not liable for the damage because it wasn’t intentional or criminal and the landlord did have insurance. The landlord is appealing that decision.
Cases like these are of real concern for landlords and property managers. The Real Estate Institute of NZ (REINZ) has written to Nick Smith, Minister for Building and Housing raising concerns at the way the Tribunal is approaching these decisions.
It’s not just REINZ that’s been in Dr Smith’s ear – even The Principal Tenancy Adjudicator was so concerned about the tribunal’s ability to perform its function well in light of the Osaki judgement that she also wrote to the Minister in September, stating that the Tribunal’s ability to “determine expeditiously disputes arising between landlords and tenants” has been severely affected.
Both letters were appealing for more clarity on the issue and it appears Nick Smith has been listening. In October, he issued a statement saying that the Government is considering making some changes to the RTA that would clear up when damages can be claimed from tenants where carelessness or negligence is involved.
“The proposal I am considering is that tenants would be liable for damage caused by carelessness or negligence up to the value of their landlord’s insurance excess but not exceeding four weeks’ rent, which is aligned with the standard tenancy bond. A different amount could be mutually agreed if specifically provided for in the tenancy agreement and would enable the tenant, if they wished, to take out their own insurance.”
Where to from here?
So, while it’s clear that the Osaki case has rocked the boat significantly and the Government is looking into making changes to the legislation that should provide the right level of protection for both landlords and tenants, we still have to live with the consequences in the months and possibly years it will take to make those changes.
The Tenancy Tribunal has issued a practice note on how it will handle claims affected by the Osaki decision, and it’s important that everyone involved in residential tenancy situations is aware of what it means. Here’s how it affects the different parties:
• Must be aware they are liable if damage is caused intentionally (e.g. punching holes in the wall) or criminally (e.g. running a meth lab), even when that damage is caused by invited visitors to the property.
• They are also liable for any damage when a landlord doesn’t have insurance.
• Their insurance costs will increase with the increased number of claims they have to make because the Tenancy Tribunal requires insurance information before making a decision. It leaves no room for negotiation between landlord and tenant for damage the tenant wishes to claim under their own insurance.
• In many cases, the costs of damage will fall under a landlords excess, which will significantly increase the costs to landlords who will have to fund any repairs themselves.
• Landlords cannot pursue tenants for the cost of the excess on an insurance claim.
• Where the damage has been caused carelessly or negligently, landlords and property managers are unable to issue 14 day Notices to Remedy which require the tenant to repair damage.
Arguably the winners in this situation. Landlords won’t be making claims for smaller amounts of damage as it’s likely to fall under their excess, but will be unable to pursue the tenant in situations such as Osaki where the damage was extensive.
What you can do about it
Tenants, be careful who you invite onto your property, and check that your landlord has insurance that covers damage accidentally or carelessly by you.
Landlords, check your insurance policy and make sure it covers damage caused by tenants and take a close look at how the excess is applied. This is also why it makes good business sense to use a professional property manager – not only is our tenant vetting process second-to-none, we’re up to date with the latest expectations from Tenancy Services and the Tribunal, and can work to mitigate the risks you are exposed to.
This situation isn’t going away overnight. We will keep a very close eye on developments in this case and will update our readers as soon as we have more information.
Licensed Real Estate Salesperson
I currently live in the Bishopdale area, having arrived in Christchurch from Palmerston North in July 2015. I have a bachelor of Dental surgery BDS Otago and practiced as a Dentist for 35 years in Palmerston North.
I am married to Gill and we have three adult children, two sons and a daughter. Our boys live in London and Berlin and our daughter lives and works in Auckland.
In my spare time I follow motorsport and cycle racing. In fact I would watch any type of sporting event. I have been an avid classic car enthusiast. I own a 1971 Fiat 124 sport classic car which I rebuilt and raced at Manfield motor circuit in Fielding for a number of years.
I also love to cook. There is a certain level of ‘therapy’ in planning and preparing a meal for family and friends. My favourite home cooked meal is a simple pasta with a slow cooked fresh tomato salsa just like mamma used to make.
My favourite restaurant in Christchurch is Chinwags with Asian fusion cuisine, but I recently discovered Francesca’s Italian restaurant and loved it. My favourite thing to do in Christchurch is to find a comfortable café and read the paper drinking great coffee.
As for favourite movies: any western!“The Good, the Bad and the Ugly,“ ‘Outlaw Josey Wales” and any Clint Eastwood film, great action-packed stuff!
My favourite holiday destination is Italy and my family’s village in Valdobbiadene, Northern Italy.
My favourite TV show is the MasterChef series particularly the Australian and NZ versions, they inspire me to cook.
I have a great sense of humour, am a man of my word, and in fact it annoys me when others don’t do what they say they will do!
I like to think you can always rely on me.
The new CCC Rateable Values have just been released. Check yours on www.ccc.govt.nz/services/rates-and-valuations/rates-and-valuation-search
February and March are the most active months of the year, closely followed by October and November. This means that majority of all Real Estate in Christchurch
is sold during a quarter of the year. After the Christmas rush has come and gone, many people will be looking forward to a ‘New Year, New Home’ mentality and will be searching through Christchurch Real Estate.
To help sell your Christchurch Property during Summer, Cowdy & Co have compiled a quick list of tips to help put the Christchurch Real Estate Spotlight on your home!
Let there be Light
Your house needs to stand out amongst other Christchurch Real Estate – one way to do this is to let it shine, literally. Let as much natural light as possible to flow through the house, get rid of thick and heavy curtains and opt for lighter fabric or blinds. This also gives the illusion of more space. Keep your windows clean and pristine, so people can see clearly the outside when inside, and the inside when outside.
Transcend Indoor/Outdoor Divisions
If you have a front or back yard with space for furniture, transcend any indoor/outdoor divisions. Showcase outdoor living by setting up the decks, balconies and gardens with outside furniture. This encourages people to visualise themselves living in your home, to picture themselves sitting outside in the sun with a cold drink and a good book.
Keep it Cool
During open homes, ensure the house is well ventilated. Utilise air conditioning if you have it, and if weather permits, keep windows and doors open to keep fresh air circulating throughout. Potential buyers spend considerable time inspecting your home, they need to be comfortable if you want them to be encouraged to spend more time. After 10 minutes it’s easy to notice whether a house is too cold, too warm, too damp etc. Monitor the temperature, humidity and ventilation during open homes.
Show Character not Personality
It’s great to show off the characteristics of your home, but avoid showcasing your personality as the current home owner. In other words, in order for potential buyers to picture themselves living in your home, they need to see their own belongings throughout the house. It’s a good idea to put away family photographs, greeting cards, toiletries and other personal items.
If you are thinking about selling your Christchurch Property this Summer, get in touch with our Christchurch Real Estate experts. Our dedicated team of agents understand the Christchurch Market and can help you through the entire selling process.
We receive a number of queries from building owners about code compliance certificates (CCCs), ranging from who is responsible for obtaining a CCC, to what happens where a building consent authority declines to issue a CCC.
Under the Building Act 2004, it is generally the owner’s responsibility to obtain all necessary consents, approvals and certificates for buildings they own. An owner must apply for a CCC as soon as practicable after all of the work being carried out under the building consent has been completed.
For residential building contracts of $30,000 (including GST) or greater however, there is an implied term that the builder must obtain all CCCs and provide them to the owner prior to issuing the final payment claim under the contract. This of course is subject to the express terms of the particular building contract.
A building consent authority must decide whether to issue the CCC within 20 working days after the application for the CCC or, if there has been no application, 2 years from the date the building consent was granted, or any agreed extension of that period.
Under the Act, a building consent authority must issue a CCC if it is satisfied on reasonable grounds that the completed building work is in keeping with the building consent. At that point in time, a building consent authority does not need to consider whether the building works comply with the Building Code, only the building consent. This is in line with the “do it once and do it right” approach and recognises that decisions need to be robust at the building consent stage.
If a building consent authority refuses to issue a CCC, it must notify the applicant in writing and provide reasons for the refusal. An owner should be given a reasonable time to carry out the remedial work identified, however a building consent authority has discretion to issue a notice to fix to require an owner to remedy any breach of the Act.
For tenants, it is often a lease requirement to obtain a CCC when undertaking any building work on the leased premises. Failure to obtain a CCC may result in the lease being terminated by the landlord.
If you’d like advice on a CCC matter, please contact Rebecca Saunders or Michael Copeland from Lane Neave Law on 03 379 3720
The Government recently passed a law that improves the way pool fencing is enforced in New Zealand. The new law, the Buil
ding (Pools) Amendment Act, will come
into force on 1 January 2017 and has been designed to save the lives of children at risk of drowning in home pools.
The new legislation is also an improvement in the practical application of pool fencing and includes some good news for spa owners. The most important changes are as follows:
All residential swimming pools must be inspected and certified every three years (designed to ensure fences and gates remain sturdy and functional over time).
Most spa pools are exempt from pool fencing rules – small, heated pools such as spa pools or hot tubs will be considered compliant if they have a lockable, child-resistant cover and are at least 760mm above the ground.
Garden or drainage ponds are specifically exempt from needing pool fencing, which clarifies a grey area in the previous legislation and makes compliance easier.
If a pool has a means of restriction of access by children that’s not a fence, a pool doesn’t need to be fenced on all sides. For example, an infinity pool where a child can’t access the edge won’t need a fence along that edge.
New technologies that ensure gates and doors prevent access are now approved under the new law.
The housing crisis. You can’t watch an episode of the 6pm news without hearing about it, and especially the effect it’s having in Auckland. Which is why it’s easy for us non-Aucklanders to be tempted to roll our eyes and switch channels.
But it’s not just an Auckland problem, and a big contributing factor is the availability of land suitable for residential housing. It’s a big deal here in Christchurch, not least because we lost a lot of valuable and useful land to the red zones after the quakes.
In October, the Government issued a National Policy Statement on Urban Development (NPS-UDC). Dr Nick Smith, Minister for Building and Housing says that the NPS requires councils to allow for greater supply of houses so that prices rise more slowly and houses are more affordable.
“The NPS-UDC will require councils to base their decisions on better information, including house prices in their areas. It is also a powerful lever for those seeking additional residential zoning from councils in that they can appeal council decisions to the Environment Court on the basis that the council is not meeting supply requirements.”
The NPS-UDC took effect on 1 December 2016, and Christchurch City Council is one of the most affected by this new stance, in addition to the more obvious situation in Auckland.
The NPS-UDC doesn’t just stop at a council level. Dr Smith explains that it will also require local authorities and infrastructure providers to better coordinate the provision of services needed to support housing and business.