With historic amounts of rain and flooding in many regions, this year has so far been challenging for many communities in the North Island. It is anticipated that these extreme weather events are likely to become more frequent in the future.
For landlords, tenants and buyers
Many properties have been damaged by flooding, landslides and silt. Some of these may be under sales agreements or leased under residential tenancy agreements. We give some advice on what landlords, tenants and buyers (who have not yet settled) can do.
The responsibility for repairing damage to a property caused by a weather event or natural disaster, including drying a property that has been damaged by flood water (and paying for the electricity to do so), lies with the landlord.
If the landlord and tenant cannot come to an agreement on the next steps, either party may apply to the Tenancy Tribunal for a way forward.
Is the property completely destroyed? If the property is no longer habitable, rent will reduce accordingly and either party may give notice to the other terminating the tenancy. A landlord must give seven days’ notice and a tenant must give two days’ notice. We recommend taking photos of the damage in case there is a dispute about whether the property is destroyed. Notices from emergency services or council officials (such as red stickers) can also be used as evidence that the property is no longer habitable.
Partially destroyed? If the property is partially destroyed, or part of the property is so seriously damaged that it is no longer habitable, rent will reduce accordingly and either party may apply to the Tenancy Tribunal for an order to end the tenancy. The tribunal may make an order terminating the tenancy if it is satisfied it will be unreasonable to require the landlord to repair the property or the tenant to continue with the tenancy at a reduced rent.
Damaged but can be repaired? The damage should be repaired at the landlord’s cost as soon as practicable. The landlord should ask a building professional whether it is safe for tenants to remain in the property in the meantime. If the tenant can remain in the property while the work is completed, the landlord and/or tenant should consider agreeing to a rent reduction to compensate the tenant for any inconvenience while the work is being carried out.
If the tenant needs to move out, the landlord and tenant should negotiate to reach an agreement. The landlord should let the tenant know how long the repairs are expected to take and when the tenant can move back in.
Bought a property but not settled?
Under the ADLS Agreement for Sale and Purchase of Real Estate, the property and chattels remain at the risk of the seller until possession is given and taken (usually on settlement day). If you have bought a property but not yet settled, the cost of repairing the damage usually lies with the seller.
Property is destroyed? If the property is destroyed or damaged so it is no longer habitable, and is not repaired prior to the settlement date, the buyer must decide to either:
- Complete the purchase at the purchase price, less an amount equal to the insurance payment received or receivable by the seller (unless the insurance company agrees to reinstate the property up to the insurance cover for the benefit of the buyer prior to the settlement date), or
- Cancel the agreement: the deposit is refunded in full and neither party can make any further claims against the other.
Damaged but can be repaired? If the property is damaged, but is still habitable, settlement takes place on settlement date at the purchase price less an amount equal to the reduction in value of the property.
The reduction in value is deemed to be equivalent to the reasonable cost of reinstatement or repair. If the seller and buyer cannot agree on a reasonable cost of repair, the dispute will follow the compensation dispute procedures under the agreement.
We can help
Insurance companies will be very busy over the coming months assessing properties and processing claims. Given the scale and timing of the extreme weather events this year, this will take some time. There are also likely to be delays in the timeframes for repairs. Both landlords and tenants, and sellers and buyers, will need to be patient, flexible and practical to resolve any issues that may arise. Any agreement made between parties should be recorded in writing.
If you need any help to work through these issues, please don’t hesitate to talk with us.