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Alexander Speech: Nelson Property Investors Assn

Mark Alexander Speech: Nelson Property Investors Association At Ocean View Function Centre, Nelson

I would like to begin by thanking the Nelson Property Investors Association members for giving me the opportunity to speak to you about landlord and tenancy issues.

In New Zealand there are around 230,000 privately owned and operated rental housing units. Most of these investors own 1? investment properties with an average value of about $180,000 each. While it may appear to some that owning a property to rent may make someone appear wealthy, the reality is that rental property embodies a mix of accumulated savings in lieu of lifestyle spending and a mortgage. Landlords provide a service The image of most landlords being greedy individuals who are trying to scalp a living at the expense of tenants is plainly and flatly wrong. Many are mum and dad operations who own one or two rental properties as a means of securing their comfort in the later years of life. Landlords provide a service, they provide accommodation to those who cannot afford or choose not to invest in their own home and they are, I believe, unfairly treated by the Residential Tenancies Act in the provision of services. Landlords are disadvantaged in the Law In no other transaction of goods and services is the provider so disadvantaged in law. How can it be that a tenant's failure to pay either bond or rent or use a bounced cheque does not in itself negate a rental agreement? In fact, quite the reverse happens. Even with a fake reference and the lack of payment a landlord cannot get the tenant out once the tenant has moved in. The landlord must first issue a ten day notice, ensure that the tenant is 21 days in arrears, inform the court bailiff or the Police (who will be unable to do anything until 36 hours after a court order), and then if the tenant absconds, the landlord can expect to receive no help from the Court, IRD or WINZ as to where they have gone to or how to reclaim lost rent. How did I become involved ? Although housing issues are not part of my portfolio areas, after my introduction last year to the infamous Ford Family who really are the tenants from hell, I became aware that landlords were increasingly becoming victims through bad legislation, as well as bad tenants. I was called in and saw that house first hand. A charitable trust had attempted to house a family who was disadvantaged in many ways and could not realistically afford to purchase their own home. Not only were walls of this house broken, obviously kicked in with the use of a fist, but even parts of the ceiling were coming away from the framing of the house; and none of this damage had anything to do with the quality of the workmanship of the building. Even worse, there were faeces throughout the house and ingrained stains in the carpeting, and this in a house that housed five children. Not only was this family in arrears for rent, but you would certainly have to question their ability and fitness to be parents as well.

As it turned out, this was the third home that the family had wilfully damaged before absconding only to show up a month later as tenants for a first-time property owner, a 19 year old, who then came to me for help. Here we have a young man setting out on life, showing initiative and motivation to get ahead, and he was utterly powerless as the people who deceived him with false references paid not one cent, occupied his property, and still?the law protected them!

In Parliament, I asked Steve Maharey why the Department of Work and Income would not reimburse landlords for rent arrears, yet would fund disastrous tenants like the Fords into their next rental property; effectively inflicting them upon an innocent landlord, and giving the financial certainty for the commission of further acts of residential violence. Reflections on the Residential Tenancies Act Now I want to point out that while we need to put more teeth into the Residential Tenancies Act, none of this would have any impact on the vast majority of tenants who are responsible and decent people, but it would protect landlords and the very substantial investments from those who are not. In fact it would actually benefit good tenants because they wouldn't have to carry the consequential costs of bad tenants. The stupidity of the system knows no bounds. As a landlord you are left virtually powerless whilst the tenant can get yet another emergency accommodation grant and prey on yet another unsuspecting landlord. What should be remembered is that there are different rules for the banks that give you the mortgage and there is no reprieve on your interests and repayments. However the landlord is expected at best to wait up to 90 days without receiving payment to get rid of bad tenants. How can it be that there are no fines or penalties for giving false references?

In one of the most recent cases I have tried to help in Christchurch, landlord Sue Evans kicked out a family and changed the locks on the house. It was reported in the media that they had only begun their tenancy four days previously and it looked terrible on the television to see the family huddled on the street clutching their meagre belongings and with their three dogs. The sound bite included that "even their dog was miserable at being kicked out." It all looked like a bad episode from a cringe inducing sitcom padded out by a bunch of second-rate scriptwriters.

Now I would personally never excuse anyone from breaking a law, even if it is a donkey like the Residential Tenancies Act, but I do understand the frustration. It seems incredulous to me that a monetary transaction must be upheld by one of the parties only, the landlord, when money did not change hands and the basis of the agreement was not in good faith. What the media did not report however was that the landlord had given the family an eight day rent free period prior to the four days, that the reference had been false, that the bond had not been paid and was lied about, that they owed a previous landlord $1,500 in rent arrears (they are in fact at this moment being taken to court about that), that they had caused significant damage and that they were in contravention of their agreement by bringing a cat and a rabbit into the house as well as their dog. It is true that their children, the three of them, were made to be victims but it wasn't the landlord?it was the shabby behaviour of the caregiver who was responsible for placing them in that unfortunate position.

Why is it that the landlord's family has to take a back seat to the tenant's family when the tenant is the one that lied and cheated? It can never be right to expect a landlord to live up to a tenancy agreement built on the lies and deceits of the tenant.

Sue Evans told me that she wasn't fined when she evicted tenant Julie McGregor because she had waived the right to prosecute when she accepted a cash payment to make the problem go away. Had Sue not paid the money the police have indicated that they would have prosecuted on several counts.

Sue also recounted a previous story of a bad tenant who not only refused to pay rent but threatened her daughter with being "dealt with by her gang connections." The upshot of that tale was that three years later the tenant is still dribbling off her rent arrears, while Sue has another order for examination for change of locks, rent arrears and cleaning up after her.

In another case of Malcolm and Philippa Main against Matthew Hooker, the tenant's advocate was not, unlike all the other participants, sworn in to give testimony. The consequence is that there is no legal expedient against prejudicial information without the sanction of truth!

In no other area of commerce that I know of is there such an imbalance of rights and obligations imposed on those who have the most to lose. As I suggested earlier, the worst of it is that ultimately good tenants will suffer because it is they who will pay the price of what the few bad tenants, encouraged by equally bad legislation, can get away with. Is it possible to protect landlords under current legislation? After being pressed, Steve Maharey agreed that landlords need to be better protected. He said so in a media release on 13 June after I harassed him over another case in Christchurch where an offending tenant family had moved into their fourth opportunity to destroy an investment. In fact my exact words to him were that, "If he doesn't do something about the tenants from hell, I will go and sit in his office and I will be his tenant from hell!"

But the Residential Tenancies Amendment Bill has already gone through the select committee and it doesn't look like addressing the main issues which have been collecting dust since February of this year. Under present law the Tenancy Tribunal can fine landlords up to $12,000 and impose a prison sentence of up to three months while local bodies have fined landlords over $40,000 for supplying so-called substandard housing.

The RTA Bill seeks to increase penalties even further, such as a $3,000 fine and exemplary damages. It seems to me that Steve Maharey simply does not get it and I think that is because he isn't a landlord, he doesn't understand what can happen to hard earned investment. Landlords are fed up with being treated as a renewable resource. The policy of this government seems to be let's grind one down and another will pop up to take its place. Tenants must have rights but no more and no less than a landlord; the legislation should be balanced. Steve Maharey thinks the rights of landlords and tenants are fundamentally unequal If a person takes a product or service without paying for it we call it theft. A rental property is no different at all. Why do some people think that they can trample over the property and human rights of the landlord and it is the landlord who gets punished? After harassing Steve Maharey I finally got a response to some of my questions, on 11 September this year. He has a unique slant on why the rights of landlords and tenants should be different. This is a quote from his letter to me:

"The RTA attempts to balance rights and obligations so as not to impose an undue burden on either party in the tenancy relationship, while so far so good".

But then he goes on to give a detailed reason why landlords should be treated differently. He says:

"There are many provisions in the Act which apply differently to either party and it is this that gives rise to perceptions of unequal treatment, or of one party benefiting at the expense of the other. It is however important to look at what degree of unequal treatment is justified and whether other sections of the Act provide a countervailing benefit or alternative course of action".

What does this mean? What Maharey seems to be saying is this, we do not want equality of opportunity, what we want is equality of outcome. Therefore, the situation where the landlord places a large amount of his own resources into a property is ultimately irrelevant when balanced against the interests of the tenant who wanted a place to live. Maharey is justifying the unequal treatment of both in order to secure a particular tenancy agreement outcome. In my opinion this is nothing more than ideological bunkum which does not reward people for their hard work or initiative but says that as a tenant, as of right, you must come first.

I sent Steve Maharey a lot of questions to respond to, and he ended his letter by saying that he has requested further advice on the issues that I raised, from the Ministry of Housing officials working on the amendment bill, and that he would forward their response. Well, I got their response on 10 November 2003 and I have to say that I am underwhelmed by it. It was not worth the wait.

If we focus on just the Residential Tenancies Amendment Bill, one of the issues I raised was that the service of finding and matching a tenant with a landlord by way of a letting fee should remain as it is. Alternative means of finding rental accommodation paid for by landlords already exist through direct advertising and allowing the tenant to pay key money is a critical screening process that effectively protects landlords. Maharey's response was that on balance, and I am quoting directly here,?...

"It was decided that tenants should not be required to pay letting fees on the basis that it is like a recruitment agency, and he goes on to say that there is no evidence to approve or disprove the assertion that landlords will raise their rental charges to recoup letting fees."

He goes on to justify this, suddenly switching roles from being the socialist that he is, to now embracing the capitalist system. He says,

"In a competitive market if a landlord decides to pass on letting fees to tenants by increasing rental rates they may only end up overpricing their property in comparison to other properties where the landlord doesn't pass on letting fees or doesn't use a real estate agent".

In other words, let's slug landlord yet again depriving them of the right to organise their affairs the way they see fit. Tenants do not have to go to agents and pay a letting fee if they do not wish to, but now they are deprived of that choice. Section 12 With regard to section 12 in regard to outgoings, it seems to me that it is the user who should pay for both water and waste water because the landlord has no effective control over how much is used. Water should now be treated as a utility no differently from the supply of electricity of gas. This approach is more likely to support conservation measures and the ambiguity over liability for water rates would be removed in the interest of fairness for both tenant and landlord. Maharey's response is that for tenancy agreements entered into after 1 December 1996 the Residential Tenancies Act currently allows landlords to charge for water supply provided to the tenancy if certain conditions are met. These conditions he lists as the premises have a separate water meter, the tenancy agreement stated at the commencement of the tenancy that the tenant shall pay for any metered water provided to the premises and the water supplier charges for water provided to the premises on the basis of metered usage. He does however go on to say that given the District Court decision, it is likely that the current provision in the Amendment Bill will be withdrawn and the issues examined in the context of wider work on the regulatory framework that the Minister of Housing has foreshadowed. Even the great socialist, Steve Maharey, can't overturn court decisions and he has to take that on board. That is a very gratifying thing. Clause 66(1) As far as clause 66(i) which deals with the landlord's ongoing obligations is concerned, now that is the provision that requires landlords of boarding houses to ensure that the facilities of the premises are in a reasonable state of cleanliness. It seems to me that it is clearly ridiculous for landlords to be expected to also be housemaid and clean up after tenants of a boarding house. If this provision were concerned with public areas then it might make some sense. Furthermore, it's an absurdity to require a landlord to clean up after tenants yet not use the facilities of the boarding house unless actually residing there. But Maharey's acolytes read this provision differently. They say that this section does not mean that the landlord has to clean up after tenants of boarding houses but simply to ensure the communal facilities are kept clean. He goes on to say that cleaning the communal places in a boarding house is not a domestic purpose, it is a commercial activity that is part of running a boarding house business and so it may be contracted out, for example. He then goes on to say that to allow any landlord or their delegated agent or manager who does not live on the premises to use the facilities for their own domestic purposes would interfere with the use of facilities by tenants. I don't believe that that is what the section actually says at all. Obviously there is going to be further argument here. Abandoned goods One of the most contentious aspects of the RTA and the amendment bill is what do to with abandoned goods. To me, it is a nonsense to expect the landlord to take possession, secure and store for up to 35 days property abandoned by tenants when it would be fairer for the landlord to receive reasonable compensation for the removal, storage or return of that property to the tenant. I have to say that Steve Maharey's response here is creative to the point of being a basis for a Walt Disney fantasy film. His response is as follows:

"This provision relates to the fact that frequently tenants' possessions have not been abandoned. Some boarding house tenants have difficulty coping with tenancy arrangements and may even have mental or physical illnesses that are episodic in nature".

This means they may return for their possessions, often the only things they have and the legislation provides a minimum period the landlord has to hold the property. Apparently, that minimum period of 35 days was chosen because mental health professionals need up to 33 days to assess the condition of a tenant who suddenly falls sick. In all my time dealing with these tenants from hell I have yet to come across a case where there has been mental illness, and that was the reason why the tenant absconded leaving behind all their possessions. I have never yet heard of a case and I would love Maharey to step up to the plate and actually give a sense of reality to this farcical explanation.

Back in August Maharey did pick up on some of my suggestions with a couple of initiatives to deal with irresponsible tenants but quite frankly more steps need to be taken. The package announced by Maharey at that time included the ability for courts to use Government held address information to trace Tenancy Tribunal order debtors; new processes for Work and Income to help beneficiary tenants meet rent arrears; investigation of improved access to Tenancy Tribunal decisions and further landlord education from the Ministry of Housing. I actually think that Maharey could do with some of that landlord education from the Ministry of Housing himself. Privacy laws While, for too long, bad tenants have been hiding behind privacy laws while landlords have been left chasing shadows because of virtually unenforceable Tenancy Tribunal orders; to have only the Ministry of Social Development on board doesn't go far enough, because by no means are bad tenants always beneficiaries. So in order to avoid discrimination this initiative needs to involve other agencies, like the IRD for example. The whole point is about improving access to information so the rigmarole of getting a Tenancy Tribunal order after the event can be avoided by effectively screening out the bad eggs before they get the key to someone else's home.

What I am not happy about though is about some of the other aspects of the reforms Maharey is suggesting, such as the plan to ensure that tenants are not evicted, with their rent arrears being covered through Work and Income. We have a situation at the moment where Work and Income will not reimburse landlords for rent arrears but will fund the offending tenants to move to another rental property, creating yet another opportunity to offend. While this new proposal does ensure that landlords should get paid, it does not make these tenants any more responsible. There is no guarantee they are suddenly going to become good tenants, and for landlords who simply want them out, this isn't an answer. I would certainly like to see wilful abandonment of a property included as an offence under the Residential Tenancies Act.

I believe wholeheartedly that if we are to move ahead and create a sense of balance between the rights and obligations of landlords with the rights and obligations of tenants we must revisit the Residential Tenancies Act of 1986. It's woefully inadequate and woefully out of date.

I'll just highlight a couple of aspects that I think we need to look at.

I believe that the bond, while being mandated at four weeks, should in some cases be negotiated between tenant and landlord. There may be circumstances where a bond in excess of four weeks is desirable; for example where a tenant has a bad track record, or is a flight risk such as a person resident in New Zealand temporarily. Perhaps guidelines such as a minimum of two and a maximum of 12 weeks, in line with the 90 day termin ation period, would be a reasonable alternative.

Now I want to draw your attention to various sections of the RTA. Section 23 Because people are increasingly getting paid monthly, rent paid monthly would currently be construed as a breach of Section 23 (1) (a) of the Act because it could be construed as being a waiver of the Act. A rental arrangement of a minimum of one week to a maximum of four weeks in advance, negotiated between landlord and tenant, would make sense. Furthermore, there should be a means whereby the rent should be paid in advance to avoid the situation where the first the landlord is made aware of an arrears, is when he is already in arrears. Section 40 Section 40 talks about the responsibilities of the tenant and the landlord but while the Act specifies what tenants must do, there is no provision for offences if the conditions are breached. Contrast that with sections 12, 17, 18, 19, 23, 27, 29, 30, 48 and 137 which contain offences by the lan dlord with fines or imprisonment provisions. It is the landlord that is leaving his investment at risk and in the hands of the tenant. Undoubtedly there should be a balance of rights and obligations. There should be an equivalent set of obligations and penalties on both tenant and landlord. An example might be a fine for wilfully vacating a premise with a failure to provide notice. Furthermore, and I think this is important, all rights under the Act should be waived until the negotiated bond is paid in full. Section 55 Let us look at section 55 which deals with the termination on non-payment of rent, damage or assault. Why can a landlord be fined $750 for taking more than four weeks bond or lodged after 23 days but a tenant who effectively does the same thing by being in arrears gets a 21 day grace period and faces no punishable offence? The arrears notice period should be the same as the rent payment period and if not paid by then, the rental agreement should be terminated, with the addition of imposable fines. Section 59 Section 59 deals with the destruction of premises. The period of notice shall be not less than seven days, clearly that is an invitation for more time to do more damage. Where there is wilful damage, eviction should be immediate with help from Police if necessary. Access to emergency eviction could be treated by say the Police and/or a JP. That would be reasonable.

I would just like to conclude with five additional points that I think are vitally important when we are considering a revision of the Residential Tenancies Act.

Firstly, WINZ ought not to be able to advance an emergency accommodation grant until, and unless it is satisfied that all rent arrears have been dealt with. WINZ should help with the processes of enforcement of arrears in rent.

Secondly, WINZ should pay rent directly to the landlord thereby ensuring that monies owed are being paid. In a question to Steve Maharey, Muriel Newman asked "How many New Zealand Corporation tenants have their rent deducted directly from their benefit and what is the process undertaken by Housing New Zealand for setting up this arrangement?". Steve Maharey answered "I am advised by Housing New Zealand Corporation that as at 16 July 2003 60% or 36,849 tenants of its tenants have had their rent paid directly from their benefit". Now, why is this not done to the same degree for private landlords? All that is required is the consent of the tenant. Is this just the State looking after its own interests, and the public can go to hell?

Thirdly, WINZ, IRD and the Courts must share information with respect to giving effect to all Tenancy Tribunal resolutions. It cannot possibly make sense for there to be a judgment handed down, and not implemented, and expect to have landlords (sometimes in their 60s, 70s or even 80s), running around playing detective and policeman at the same time, in order to get the recompense that they are entitled to. False references should be considered an offence by both the tenant and the provider of the reference and punishable by a fine. Why is it that we legitimate liars? Some people fudge their CV to try and get a better job, but when you present a bold faced lie about your reliability as a tenant, critical to the landlord's decision-making process, and to not be held to account for it, just staggers me.

Fourthly, there should be a reciprocal period of tenancy termination for both tenant and landlord and finally, failure to comply with the contract as agreed, (for example whether or not you are entitled to smoke in the premises or have a pet or dog, whatever) to be resolved to the mutual satisfaction of tenant and landlord within the rental paid period, or termination of the tenancy goes into effect.

The bottom line is the landlord, because of his investment, needs to have the law to protect that investment. My sympathies lie with landlords who when lumbered with tenants who either don't pay up, lie their way into the house or have a history of trashing properties, are forced to go through weeks of bureaucratic red tape. And, if luck goes their way and they actually end up with a judgment in their favour, there is no teeth to effect it. Why are landlords supposed to sit mute while they are either being ripped off or having their investments destroyed before their eyes. Sue Evans kicked out her tenants for this very reason.

As I said earlier, in that case, the tenant Julie McGregor, lied to get into the place. There is a court case pending against that woman. She has been declared bankrupt twice and there are seven court orders against her. Sue Evans was fined under several areas of the Act. There is also a public apology but this was done to prevent Sue from being potentially put in prison. McGregor is a woman who has a proven track record of offending and still the taxpayer is funding for free legal aid for her. In addition, Tenants Protection Association, which is advocating for her, is also funded by the taxpayer. The landlord, Keely Murphy, who is a single mother can't get legal aid and an insurance company, State Insurance, won't be sending a lawyer for this case, because the odds are stacked in the tenant's favour. The reported damage is $3,600 and the landlord has hard evidence to back it up, but the system protects the guilty tenant. Generally, the Tribunal adjudicators throw fines and exemplary damages at the landlord but virtually nothing at the bad tenant as (according to them) there are no offences committed by a bad tenant. These imbalances must be redressed Above all, we must redress the imbalance within the original Act. Much can be done if we make it an offence to fraudulently enter into a rental agreement with forged references or have an accomplice to assist a rental agreement through lies, deceit and bounced cheques. Hard as it may seem for this Government to understand and Steve Maharey in particular, landlords are not greedy, money hungry, avaricious and unscrupulous individuals who prey on the plight of the homeless. They are actually people with families who are trying to look after themselves, doing it the best way they can by investing in a home that provides a service to others.

Is it not reasonable, that as in every other arena of economic life in this country, landlords must be protected as providers of goods and services?

I think so!

Thank you.

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