APIA Blog

RSS Feed

Ouch! Absent or defective insulation statement could set y​ou back $500

Sunday, November 05, 2017

From 1 July 2016, all new residential tenancy agreements are required to include a signed insulation statement detailing the extent of insulation in the property.  At the time of passage, this requirement was seen by many as a bureaucratic intermediary in anticipation of universal insulation by 2019.  But if its recent orders are anything to go by, it is apparent that the Tribunal has every intention to audit this particular obligation under the strictest of interpretation. 

Insulation statement at a glance 

Amendments to the Residential Tenancies Act in 2016 (commonly referred to as that for 'minimum standards') obligate the landlord, amongst other things, to disclose the extent to which the rental property has been insulated in the form of a signed statement.  This statement has to be a part of any new tenancy agreement.  The landlord commits an unlawful act under the RTA if said statement is absent, defective, or contains false or misleading information.  An exemplary damage of up to $500 is awardable in the case of a breach.

The anatomy of an insulation statement 

At a minimum, the insulation statement must include: 

  • Whether or not there is insulation;
  • If there is insulation, where it is - the extent and location in ceilings, floors or walls and in rooms or parts of rooms;
  • What type of insulation product is installed, and its level of thermal resistance (R-value) if known; 
  • What condition the insulation is in including information such as whether there is damage to or dampness detected on the material as well as whether any is not secured to the property; 
  • The landlord's signature (that is separate from the signature on the agreement). 
If the landlord cannot ascertain information about insulation at any particular location of the property, then the insulation statement must include: 
  • An outline of what information is missing about that location;
  • An explanation as to why the information cannot be gathered; 
  • A confirmation that the landlord has made all reasonable efforts to get that information and has been unsuccessful. 
Additional requirements are placed on landlords of income-related tenancies and can be found here.
If you are not comfortable drafting your own statement for any reason then consider either consulting or using the templated statement supplied by Tenancy Services. 

 

Where landlords become unstuck

A good way to understand common mistakes in this respect is to consider the below Tribunal orders:

  • In Johnson, Richard vs Sherburn Family Trust and other parties an exemplary damage of $150 is awarded for a lack of an insulation statement.  Note that the tenancy agreement was entered into in February 2017.  It wasn't until August 2017, in a counterclaim, that the tenant alleged the breach. The adjudicator scales penalty back after considering whether the breach was intentional and whether it would be just to impose maximum fine having regard to all the factors set out in section 109(3) of the RTA.  The landlords' subsequent action (i.e. arranging for insulation assessment) was also a mitigating factor considered.
  • In Pal, David vs Street Smart Property Management Limited, the tenant is awarded a total of $470.44 (made up of compensation, exemplary damage, and filing fee) for defective and misleading insulation statement.  Compensation ($300) is awarded on the basis of the tenant incurring additional electricity and heating costs during the tenancy while the exemplary damage ($150) speaks to the tenancy agreement stating that the property was 'insulated' when it was not. 
  • In Brittain, Amy vs Redcoats limited as agent for Ed Bosson and Neryn Bereton, the tenant's claim for compensation (relocation costs) and exemplary damage (for lack of insulation statement) is rejected.  Though circumstances of this case bear resemblance to Johnson (though not entirely similar).  The adjudicator is not satisfied by the tenant's claim that had she received the insulation statement at the time of the agreement, she would not have entered into the tenancy.  The adjudicator considered also that the landlords are unlikely to repeat the offense.  The outcome is that claims for compensation and exemplary damage are declined and the agreement canceled. 
  • In Inspire Property Management Limited vs Saheb, Farisha Fareen, the tenant seeks to invalidate a fixed-term tenancy on the basis that the provided insulation statement in the agreement had not been filled out by the landlord.  The Tribunal surmises that though a failure to provide an insulation statement is an unlawful act, the failure to fill out a provided statement does not itself invalidate the agreement.  No exemplary damage or compensation has been awarded for the defective insulation statement in this case. 
Some observations to note: 
  • Signed insulation statements must be included at the start of the tenancy; 
  • A defective, absent, or misleading insulation statement is sometimes used by tenants in counterclaims at the time of dispute; 
  • So far, no tenant has been successful at invalidating the entire tenancy on the basis of an absent or defective insulation statement.  It is worth noting that the Tribunal does not appear to find such a claim repugnant as so far cases have failed on evidence rather than the substance of the argument;
  • An absent or defective statement could lead to both compensation (electricity, heating, relocation costs) and exemplary damage; 
  • If you entered into a tenancy agreement after July 2016 without supplying an adequate insulation statement but have since remediated the breach then the remediation itself can mitigate potential damage awarded to the tenant. 
Tips for landlords 
  • Arrange for an insulation assessment from a qualified assessor.  We recommend contacting Kevan Hunt from The Insulation Warehouse Limited* for a complimentary assessment.  TIWL is also offering APIA members excellent discounts on insulation installations and top-ups;  
  • Set up an insulation statement template to insert into all future tenancy agreements.  The Tenancy Services template is a good starting point; 
  • If you have an installation or assessment certificate issued by an insulator, there is no harm in appending a copy to the tenancy agreement alongside the insulation statement; 
  • If practicable, take the tenant through the property (ceiling and underfloor) to show him/her the insulation before obtaining the signature on the tenancy agreement, document in an email that you had shown them the insulation on site. 
  • If your property is not yet insulated then it would be prudent to start making plans to do so as compliance date (July 2019) is right around the corner.  You will also be interested to know that our Property Management Partner, Barfoot & Thompson, is offering to contribute 50% of either your floor or ceiling insulation with a management package before 30th November 2017.  Click here for more information.  
 

 

Recent Posts


Tags


Archive

Introducing Our Partners
Principal Sponsor - Kris Pedersen Mortgages & Insurance logo Gold Sponsor - Barfoot & Thompson logo Gold Sponsor - CoreLogic logo Keith Hay Homes logo Maintain To Profit logo The New Zealand Property Investors' Federation logo
09 360 2376
info@apia.org.nz

The Tenancy Practice Service and TPS Credit Control work closely with the Auckland Property Investors' Association. Our vision of bringing helpful resources, documents and high quality services to Auckland Property Investors and Property Managers is shared by APIA, so its a partnership that works well. 

The Auckland Property Investors' Association is a great organisation for those who want access to advice and information from a range of industry experts and partners. 



Mathieu Holt- Managing Director, The Tenancy Practice Service & TPS Credit Control
Through the Association I found the channels and methods to fund the purchase of property I never dreamed about. Grant Brown

All round it has been one of those things Neil and I felt was really worthwhile belonging to. We have learned so much it has just built our confidence in what we are doing.

Janice Bieleski
I read two articles in the monthly magazine that saved me over $5,000. That is my membership fee for the next 26 years and I am sure I will learn a whole lot more! John Duncan
Fantastic organisation. The networking opportunities are brilliant and provide us with information and opportunities that cannot be obtained anywhere else. We learn something new at every meeting and we've been in this game for nearly 20 years. Pauline and Gyanen Kumar

I find the information obtained from various APIA meetings very useful in guiding my own property investment and rental management.  I also enjoy the networking opportunities with like-minded investors.  I am inspired by other investors’ success and find the more experiences and knowledge that I share with others, the more confident I become.  

Thanks to all APIA event organizers and administrators for your brilliant work. 

Stella Shao

I like talking to people and learning from their experience because it gives me the confidence to invest well. I think it is a knowledge thing. I now know I am doing things the right way.

Stephen Weatherall

My APIA membership has become a total success.

Every time I attend a monthly or regional meeting I come away with so many useful and positive tips that have added value to my property investments and management.

Not only that, the website is a great place for practical advice and useful information. It has now evolved into an important resource for my business.

Talk about value for money! The discounts I have been getting at Bunnings when I present my APIA membership card have more than paid for my annual subscription!

Tim Duffett, Plan A Investments Limited