Unforeseen Trouble in your neighbourhood?

If your tenant is a victim of crime, is this an unforeseen change in their circumstances which may result in them breaking their fixed term lease early?

I'm currently waiting on the outcome of a Tribunal hearing to find out.

Some people would consider having their car broken into as a reason to move away from an area as soon as possible.  Others would shrug and say 'that the roulette wheel of life, could have happened anywhere'.

If you have a tenant in the former category, and you are firmly in the latter, your tenant will probably find you unsympathetic to their cause.  But will they win over the sympathy of the Tribunal should they wish to break their fixed term tenancy early?  

The Tribunal does not need to feel that the hardship caused by an unforeseen event is severe for a reasonable person, but that it was severe for the person affected.  So if that person is a drama queen, their drama is real for them, even if the rest of the world is rolling their eyes at their thespian antics.

I personally can't understand it when people make a big deal out of a small issue.  I'm not cut from that cloth and I'm told I have a higher tolerance to stress than most.  I'm pretty hard to panic, it really needs to be life and death for me to get that feeling of 'OMG what am I going to do?', which is why I am so good at first aid.  I don't like feeling that way, so I prepare and practice.  (I'm definitely one to have on your team when the Zombie Apocalypse happens; the only question is, are you one I want on mine?).

If you have always lived in a plain, foothills will seem as high as the Himalayas to a mountain goat.  What do the Himalayas look like to an astronaut in space?  A wrinkle on a tablecloth?  Problems are all a matter of perspective.  

It was suggested to me today that landlords buying property in a particular area should expect problems with crime, and their tenants wanting to leave as a result, and it is a risk they should bear.  I wish I'd retorted that tenants wanting to live in a particular area should expect problems with crime, and their landlords wanting them to stay in spite of it, and it is a risk they should bear.  If an area has a reputation, is an event in keeping with that reputation unforeseen?

I will find out when the order comes.

Osaki sucks for Landlords

This Osaki case is no end of trouble.  If you've not heard of it, if you are a landlord you probably soon will.  The Osaki's burnt down the rental property they lived in when they left an unattended pot of oil on the stove.  They didn't have insurance cover themselves.  They then refused to be held responsible for their careless negligence, stating they should have advantage of the landlords insurance cover.  The landlords insurance company took them to court, and, unbelievably and against all understanding of all that is fair and right in the world, lost.

I think however there have been a few assumptions made in the decision which need to be addressed, and also there is a huge gap that the Tribunal has not recognised.

First the assumptions.  Reading the Court of Appeal decision, paragraph 36 states that the tenants effectively pay the insurance premium for residential landlords through rent.  I guess the judge in this case had never heard of negative gearing?  Or thinks all landlords live off the proceeds of rent and don’t have other jobs which keep everything afloat.  For investors like me who realise some years will be losses and some will be profits, I am often forking out in the loss years to cover expenses.  All sorts of things can change, such as Government policy changing deductibles (e.g. loss of depreciation), increases in expenses like rates, insurance or interest rates; or doing a lot of maintenance like painting.  It’s pretty hard to say with conviction that the insurance premium is always covered by the rent, even if nothing else is.

In Paragraph 53 they say that the cost of insurance is factored into market rent.  Umm, I’m pretty sure I’ve never heard a residential tenant offer rent for a property based on the landlords outgoings.  Rather, it’s determined by what the landlord next door is charging – and they may choose not to have insurance, and may have owned the property for 50 years, so are not worried about their mortgage repayments or insurance premiums, unlike their neighbour.   The decision then goes on to say that if the premises doesn’t attract a sufficient return then it will not be on the residential tenancy market.  Yep, property is such a liquid asset.  Oh wait, no it isn’t.  But the landlord who can’t get enough rent to cover their outgoings can always sell it at a profit to cover their debts on the property, can’t they.  Oh wait, that also is not always the case.  If it were, developers would never go broke.  So what are they thinking of here?

Landlords certainly suffer because of a lot of assumptions.

The huge gap in the decision now:

The Osaki case talks about insured peril, like fire and flood.  As far as I’m aware all insurance policies cover fire, it’s the mainstay of policies, which is why the Osaki’s had the benefit of the landlords insurance cover, as they had cover for that peril of fire.  I am yet to see a peril identified in an insurance policy as ‘4 year old spilling drink on the carpet and nobody bothering to clean it up’.  I am yet to get clarification on the definition of ‘insured peril’, and I think it is particularly relevant for most landlords who suffer losses from careless and negligent tenants.  While I’m not keen to see long lists of what is and isn’t included in a policy, I’d like a peril to be a bit more defined than ‘accidental damage’.

As for the excess, I note commercial leases, which are based on the Property Law Act, of which the Osaki decision draws, require tenants to pay the insurance excess, as this is the amount that the landlord is not insured.  As Housing New Zealand is not insured, they can pursue their tenants for the entire cost of damage, all landlords should be able to claim the excess on their insurance policy as an amount they don’t have insurance for.  I don’t see what the difference is between having no cover whatsoever, and having cover for amounts over the excess eg $550 of damage.  The first $550 in either case should be the tenants cost to bear.

The Osaki decision also makes reference to Acts of Parliament correcting judge made law.  When will we see an amendment to the Residential Tenancies Act to correct this particular judge made law?

It is costing the insurance industry and landlords millions of dollars and there is no personal responsibility by tenants for careless or unintentional damage anymore, no matter how sever.

I welcome your comments on this post, and urge you to discuss it with your MP.  

People forced to live in garages?

I’ve read and heard so many articles about just how bad the housing crisis is that people are forced to live in garages and emergency accommodation at great expense.  What I haven’t heard is ‘why’.  Oh, I hear that it’s because there is a housing shortage, too many migrants, too many greedy investors, too many houses being sold and so on.  But that doesn’t really answer why some people are in emergency housing and desperate situations, yet others are not.  Am I missing something?  I’m not hearing why people are not still in the houses they were in before things hit the fan.  Contrary to popular myth, most landlords don’t like tenants leaving and needing to find new ones, it’s a sometimes stressful and expensive exercise full of risks for both landlords and tenants. And yet, the myth persists that landlords kick out tenants at a whim and without much notice.  There is more to this story that is not being spoken about.  And why isn’t it?  

I believe there is an unspoken bias in the media which says ‘tenants = good, landlords = bad”.  While I am sure there are plenty of people who are blameless for what life throws at them (most accidents and sickness for instance), I find it hard to believe they make up the majority of people in emergency accommodation.  The questions I want asked in these reports is if they paid their rent on time and in full, if the landlord took them to Tribunal or issued a 14 Day Notice to Remedy some matter.  I bet what we will first hear is a whole lot of complaints about greedy landlords in substandard housing, but if the journalist persists with the question, I believe a lot of those in ‘housing crisis’ ended up there because they didn’t meet their half of the bargain, i.e. they didn’t pay their rent, disturbed the neighbours or other tenants, caused damage or some other big no-no.

How do I know about it?  Because people come to me with their down on their luck stories, and I ask them. I eventually hear that they did something they shouldn’t, or didn’t do something they should.  It always comes back to something within their sphere of control.  Victors or victims seem to differ in that one takes responsibility for their own selves, the other blames the world or their luck.  I believe psychologists refer to the internal or external ‘loci of control’ – what we believe to be guiding our lives.  Is it within us, or without?  If you have ‘bad luck’, why let someone or something else guide your less than optimal fortune?  Surely it’s time to do the steering yourself?

People forced to live in garages?

I’ve read and heard so many articles about just how bad the housing crisis is that people are forced to live in garages and emergency accommodation at great expense.  What I haven’t heard is ‘why’.  Oh, I hear that it’s because there is a housing shortage, too many migrants, too many greedy investors, too many houses being sold and so on.  But that doesn’t really answer why some people are in emergency housing and desperate situations, yet others are not.  Am I missing something?  I’m not hearing why people are not still in the houses they were in before things hit the fan.  Contrary to popular myth, most landlords don’t like tenants leaving and needing to find new ones, it’s a sometimes stressful and expensive exercise full of risks for both landlords and tenants. And yet, the myth persists that landlords kick out tenants at a whim and without much notice.  There is more to this story that is not being spoken about.  And why isn’t it?  

I believe there is an unspoken bias in the media which says ‘tenants = good, landlords = bad”.  While I am sure there are plenty of people who are blameless for what life throws at them (most accidents and sickness for instance), I find it hard to believe they make up the majority of people in emergency accommodation.  The questions I want asked in these reports is if they paid their rent on time and in full, if the landlord took them to Tribunal or issued a 14 Day Notice to Remedy some matter.  I bet what we will first hear is a whole lot of complaints about greedy landlords in substandard housing, but if the journalist persists with the question, I believe a lot of those in ‘housing crisis’ ended up there because they didn’t meet their half of the bargain, i.e. they didn’t pay their rent, disturbed the neighbours or other tenants, caused damage or some other big no-no.

How do I know about it?  Because people come to me with their down on their luck stories, and I ask them. I eventually hear that they did something they shouldn’t, or didn’t do something they should.  It always comes back to something within their sphere of control.  Victors or victims seem to differ in that one takes responsibility for their own selves, the other blames the world or their luck.  I believe psychologists refer to the internal or external ‘loci of control’ – what we believe to be guiding our lives.  Is it within us, or without?  If you have ‘bad luck’, why let someone or something else guide your less than optimal fortune?  Surely it’s time to do the steering yourself?