Taking on a flatmate can be a way for owner-occupiers of residential properties to help pay their mortgage or to generate income. Owners may believe that the Residential Tenancies Act 1986 (Act) does not apply in such cases. However, the High Court decision in Harding v Schellevis [2021] NZHC 1265 illustrates that the Act may still apply to flatmates.
Background
Harding owned a two-storey house. Part of the first storey included a self-contained granny flat. The granny flat had its own amenities and internet connection, but the water and power costs were shared with the rest of the house. The local council had also advised Harding that the granny flat was not considered separate from the house.
Harding rented out the granny flat to Schellevis under a “house/flat-sharing” agreement. The agreement stated the Act did not apply because Harding lived in the house. The parties got into a dispute and Schellevis took Harding to the Tenancy Tribunal.
The Act does not apply when premises, not being a boarding house, continue to be used by a landlord, owner, or their family as a principal place of residence.
Decision
Harding argued the Tribunal could not resolve the dispute because the granny flat was part of the premises used by Harding as her principal place of residence. The Tribunal dismissed this argument and found the granny flat was a separate premise from the rest of the house. The same conclusion was reached on appeal by the District Court.
The High Court on second appeal looked at the ordinary meaning of premises and whether there could be separate premises within the house. The Court noted the house was split into Harding’s area and the self-contained granny flat. Neither party could enter the other’s area without notice under the agreement. The granny-flat was completely self-contained and Schellevis had exclusive use of that area.
The High Court upheld the appeal.
Implications
In considering renting out part of their homes, owners should first ask themselves the following:
- Are the “premises” of the rented area attached to the house?
- If the “premises” are attached, are any amenities shared (such as the bathroom and kitchen)?
- Can the owner enter any part of the “premises” without providing notice to or obtaining permission from the tenant?
- Do the flatmate and owner share any common spaces?
If the answer to any of these questions is no, then the flatmate may be a tenant covered by the Act. If the Act applies then an owner will need to comply with their obligations under the Act, including but not limited to:
- meeting the Healthy Homes Standards;
- ensuring the property is secure;
- knowing their repair and maintenance obligations;
- keeping records of rent;
- understanding the requirements to end a tenancy; and
- knowing the tenant’s rights.
Even if a flatmate agrees in writing that there is not a residential tenancy the owner cannot contract out of the Act.
It is important that owners carefully consider the implications of taking on a flatmate in light of the above.
For more targeted advice to your situation, get in touch with our team.
