Challenging rent levels

If a tenant is concerned about the amount of rent their landlord is charging they might first want to start by trying to negotiate with the landlord to bring the rent down to a reasonable level. There are tips on negotiating rent levels here.

If the tenant is unsuccessful in negotiating a rent reduction they might want to look at whether the rent is significantly more than what others are paying in similar rental properties in their area.

Rent exceeds market rent by substantial amount

If the tenant’s rent appears to substantially exceed the rents of other similar properties in the same area, the tenant can challenge the rent amount in the Tenancy Tribunal. The tenant can ask for the rent to be reduced to a level that is in line with “market rent” (s 25 RTA).

“Market rent” is the amount a landlord could reasonably expect to receive and a tenant could reasonably expect to pay for a tenancy. The rent for similar rentals in the area (or in similar areas) can be used as a comparison. The personal circumstances of the landlord and tenant are not considered to be relevant factors, however the Tribunal can take into account other matters that they consider to be relevant when deciding the market rent for a property (s 25(3) RTA)

Market rent data

There is helpful data online that gives average rents for different areas in New Zealand.

Tenancy Services Market Rent Tool

The Tenancy Services market rent tool can be used to search by suburb, to find out the average rent charged for apartments, and different sized houses in that area.

The market rent information provided by Tenancy Services comes from bond data, ie, the average rent of actual bonds lodged by private landlords with Tenancy Services. While this information can give an indication of the market, it’s important to note that this data has limitations. It only reflects properties where bonds have been lodged in the previous 6 months so it may not reflect a full and accurate picture of the rental market.

Raw rental bond information is also available here.

Trade Me listing data

Trade Me publishes a monthly Rental Price Index which provides insights into the rental market covering price trends by type and size of property across New Zealand. This data is based on the median ‘asking price’ of rentals that have been listed on Trade Me Property.

How does the Tenancy Tribunal decide rent questions?

The Tenancy Tribunal can order that rent be reduced to market rent where the rent being charged exceeds market rent by a “substantial amount” (s 25(1) RTA). Determining this is an objective task - there is no clear formula or rule about how it should be done. The Tribunal’s initial focus is to look at the level of rent being paid for comparable properties, then to consider whether there are any other relevant matters.

The types of things the Tenancy Tribunal looks at

The types of things the Tenancy Tribunal looks at, and which can be provided as evidence when challenging the rent levels, are:

Comparison with advertisements for similar properties

This involves looking at ads for similar premises (ie, size and condition) in the same locality, to see what rent is being charged. It gives a gauge of the current 'going rate', but has its limitations. Advertisements usually list the essential features of the property (eg, number of bedrooms, living rooms, bathrooms, garage), but may not have much information that allows for a comparison of the relative quality and condition of the premises.

'Market rents’ published by Tenancy Services

The information published by Tenancy Services is generally seen as a touchstone for market rent. Median rent is provided, as well as 'lower quartile' and 'upper quartile' rents. Rents can vary within the broad areas listed, so it’s important to consider where the property the tenant is renting sits in relation to the other properties covered.

10% rule of thumb

A 'rule of thumb' that has often been used in the Tenancy Tribunal is that rent that is more than 10% above the market average is likely to be considered a "substantial amount" in excess of market rent (see Tenancy Tribunal Order 4230342, at paragraph 31). However, it’s important to recognise that an amount that is less than 10% over 'market rent' could still be argued to be "substantial" (see Case study below).

Other relevant factors

There is very little case law about what else can be considered. The Tribunal cannot take into consideration the tenant's or landlord’s personal circumstances, and rents paid by previous tenants for the property are not necessarily relevant.

Things that have been, or may be, considered are:

Whether the rent appraisal for the property could have easily been influenced by the landlord (see Tenancy Tribunal order 4246581 at paragraph 14).
Whether the landlord’s return on investment is reasonable or excessive (see Tenancy Tribunal Order 4235532, at paragraphs 33-34, 40-44).
The rate of increase in the rent in relation to the consumer price index (see Tenancy Tribunal Order 4235532, at paragraphs 33-34, 40-44).

Case study

The Tenancy Tribunal noted: “The term 'substantial' is not defined in the RTA. Some of the older Tribunal cases have suggested a 'rule of thumb' of 10% over market rent. In my view that is not a helpful guideline. Where rents increase at a rate above inflation, rent will eventually assume a greater proportion of household incomes. This will in turn reduce the availability of income for other household expenditure. In these circumstances, it is arguable that even a relatively modest increase over market rent could have a substantial effect.”

J Smith Adjudicator, Tenancy Tribunal Order 4235532, at paragraph 23.

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