17-04-2009

The issue of who pays for what in a rental property has caused many problems over the years. With a move towards user-pays for many household outgoings, there is likely to be a higher number of problems occurring in the future. For example new charges for services such as rubbish removal, internet connections, alarm and television services will probably increase these problems.

Water and wastewater charges have been a prime cause of concern for a number of years. Auckland and Nelson are affected currently, with other areas looking likely to follow.

Government has attempted to solve the problem through the Residential Tenancies Act (RTA) Amendment Bill No 2. However the proposed changes have already been rendered out-of-date and will not solve the wastewater problem they were designed to address.

There is a high degree of confusion over wastewater charges and the NZ Property Investors’ Federation (NZPIF) believes it is time to stop treating water as somehow different from other utilities such as electricity and gas.

The wastewater problem has arisen following the move by many local authorities to separate water charges from rating charges. This move was made because it was considered fair and ecologically prudent to base water charges on usage. The law was changed so that a tenant could be charged for the water used when it was charged on a metered basis, the premises have a separate water meter and the charge was included in the tenancy agreement.

Some local authorities established standalone businesses that could choose how they charged customers for water use. Metrowater, owned by Auckland City Council, split its charges into sections, including a section for wastewater charges.

The Tenancy Tribunal decided that as the RTA stated that the tenant was responsible for all water supplied “to” the premises, and as wastewater came “from” the premises, then wastewater was the responsibility of the landlord.

This point was argued for many years before an Auckland District Court decision in September 2003 overturned the Tenancy Tribunal decision and allowed all water charges, including metered wastewater, to be the responsibility of the tenant. This was a good decision as it reinstated the original intent of the legislation.

It has been considered that the RTA is not flexible enough to accommodate the various ways suppliers charge for utilities and services since they were unbundled from the general rates bill by some local authorities. The resulting confusion leads to disputes and inconsistent Tribunal decisions.

Government policy advisors have attempted a solution to the wastewater problem through the Residential Tenancies Act Amendment Bill No 2, which would apply to all outgoings (Section 39 of the Act). The proposal is that the landlord is responsible for all outgoings, such as general rates, insurance and where applicable body corporate levies, that are incurred whether or not the premises are occupied. The landlord is also responsible for outgoings for common facilities.

The tenant would be responsible for outgoings that are exclusively attributable to the tenant’s occupation of the premises, or the use of the facilities. Examples of the tenant’s responsibility include charges for electricity and gas, telephone and Internet, plus charges for water/wastewater based on consumption.

Unfortunately this attempt to solve the problem has already been superseded by Manukau Water changing the way they charge for wastewater. Manukau Water has introduced a wastewater charge of $315 per year regardless of whether the premises are occupied or not. Under the proposed changes to Section 39, this would make them payable by the landlord, which was clearly not intended.

With Auckland now likely to be operated as one large city, it has been suggested that the Manukau model be adopted for all of Auckland.

Rather than trying to work around the different ways that water is charged, the NZPIF believes that the wastewater problem would be best solved through having water and wastewater charges treated in the same manner as other utilities. Any utility (phone, gas, electricity, water, wastewater, rubbish bags etc) that is charged on a usage basis is the responsibility of the tenant. This includes all line charges, which are a pro-rata payment for utility maintenance.

The NZPIF has drafted a suggested change to new section 39 of the Bill, which deals with outgoings. The suggested changes clarify that tenants are responsible for water supplied on a user-pays basis while also making it clear the outgoings for which landlords and tenants are responsible.

This proposal has been forwarded to the Minister of Building and Housing, Phil Heatley, plus policy analysts working on the Bill.