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Government to intervene as Osaki threatens to take down tribunal

  • Head adjudicator writes to Minister with grave concerns about Tribunal effectiveness and credibility
  • Adjudicators appear to be split on how to deal with Osaki
  • Minister signals action will be taken

The Government appears to be finally taking action and stepping in to make changes as the slow-moving train crash of Osaki v Holler starts to take its toll.

On the 23rd of September, Head Adjudicator Melissa Poole has taken the drastic and necessary step of writing to Housing Minister Dr. Nick Smith pleading for intervention. One must feel sorry for Ms. Poole who was thrown a hospital pass by the Court of Appeal decision not to make tenants liable for accidental damage. However, many in the Property Management industry predicted the chaos that would follow the decision of the Court of Appeal back in April of this year.

In her letter, Ms. Poole says “I have grave concerns about the ability of the Tribunal to maintain its current efficiencies and timeliness if this situation continues” she then goes on to say “More broadly, because of the level of landlord anger about this development, I also hold some concerns about the reputation of the Tribunal”.

Ms. Poole also points out that Tribunal had no part in creating this situation. This may be so, however, two cases have highlighted inefficiencies with Tribunal and also points to the fact that adjudicators may be split on how to deal with cases of tenant damage.

Are adjudicators split?

In our last newsletter, we highlighted the case in Foxton where a tenant had been deemed to be not liable for damage caused by a pet dog urinating on a carpet even though the dog was not allowed at the property.

Since then another case almost identical to the Foxton case made the news as this time the ruling went in the landlord's favour. In this case, the tenant had five cats locked in a room and the cats had caused considerable damage to curtains and carpets.

Adjudicator Smallbone ordered compensation due to the fact that the although the tenant may not have intended for the curtains to be damaged, her decision to leave the cats in the room clearly lead to damage to curtains and the carpet. The Adjudicator then goes on to state that the damage was willful due to tenants adopted a way of life that lead to the inevitable damage to the premises.

This decision was deemed to be a major victory for landlords and property managers alike.

However, it does indicate that adjudicators are split on how to interpret the Osaki ruling.

The question both these cases bring up is that whether a tenant’s way of life can constitute as intentional damage. Two adjudicators appear to have two different opinions.

The Foxton case has been appealed and one must favour the landlord’s chances of winning the appeal if the Wellington case is anything to go by.

What will the Government do?

Housing Minister Dr. Smith has asked MBIE to form a consultation group between tenant and landlord groups to review what practical solutions can be developed. Dr. Smith has hinted on allowing landlords to claim the excess of their insurance but not exceeding four weeks rent.

This is basically what we argued should happen after Ms. Poole released her practice notes back in July. In her practice notes, she writes landlords could not claim the excess as the excess is the loss the insured has agreed to bear.

A legal opinion we received at the time stated that landlords should be able to claim the excess as the excess is the amount the landlord is not insured meaning that they would be able to hold the tenant liable for no more than the amount of excess.

The outcome that Dr. Smith is proposing is, in our opinion, a fair and reasonable outcome.

It is a relief that the Government is finally going to step in however changes are unlikely between now and the New Year meaning the status quo will remain for some time yet.

I wholeheartedly accept that the ruling of the Court of Appeal has caused the vast majority of the problems. Ms. Poole and her adjudicators have to follow this ruling. However, the outcome and fallout of this ruling should have been foreseen. When I first became aware of the case, I was chairing the REINZ Property Management Sector Group. A number of principals of Property Management companies contacted me raising their concerns and predicting the problems this decision would cause. This was two years ago.

The year of 2016 will be remembered for many challenging changes. The fallout from Osaki has been one of these major challenges. Thankfully, there is now a glimmer of light at the end of a very long tunnel.