Rent-to-Buy Agreement Excluded from Tenancy Tribunal's Jurisdiction

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[2025] NZTT 5091928

TENANCY TRIBUNAL - Whanganui

APPLICANT: [redacted]

Landlord

RESPONDENT: [redacted]

Tenant

TENANCY ADDRESS: [ADDRESS], [POSTCODE]

Representation for applicant: [redacted] respondent: [redacted]

ORDER

1. Under section 77(2), it is declared that the agreement the parties entered into during 2017 is excluded under section 5(1)(o) and so the Tribunal does not have jurisdiction to resolve the dispute between the parties.

Reasons

1. These proceedings concern an agreement between the parties about the premises at [ADDRESS], Aramoho, Whanganui. The applicant seeks a ruling that the agreement between herself and the respondent is a residential tenancy and therefore the Tribunal has jurisdiction to determine the disputes. Ultimately, she wishes to obtain possession of the property in order to sell it.

2. The applicant seeks a declaration that the Tribunal has jurisdiction over this agreement, termination of the tenancy, possession of the premises and refund of the filing fee.

3. The respondent says that he occupies the premises under a “rent to buy” agreement for sale and purchase and so the agreement between the parties is an exclusion under section 5(1)(o) of the Residential Tenancies Act 1986.

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Matters in dispute

4. The fundamental issue in dispute is whether the current arrangement is a residential tenancy or it is an agreement for sale and purchase.

5. The key fact in dispute is the timeframe for the rent to buy agreement and whether it is now at an end.

6. Section 4 of the Act provides that the Act applies to all tenancies for residential purposes unless specifically excluded. Section 5 of the Act sets out the circumstances in which the Act does not apply, such as where the premises are commercial tenancies or for holiday purposes. The relevant exclusion in this case is section 5(1)(o):

Where the tenant is the purchaser of the premises under an agreement for sale and purchase with the landlord as vendor, not being an agreement that is revocable at will by the vendor.

7. The onus is on the applicant to establish her case. The standard of proof is on the balance of probabilities.

8. The applicant was not present at the hearing but was represented by counsel. The applicant’s evidence was in the form of an unsigned statement emailed to her lawyer. Because the applicant was not present, she could not be cross- examined.

9. The respondent attended with his counsel. The respondent gave evidence orally, reading from a statement and being available for questions.

Agreed facts

10. It is not disputed that the applicant is the registered proprietor of the premises and that since 2013 the respondent has lived there, initially pursuant to a tenancy agreement. At the start, the applicant’s mother managed the tenancy as the applicant has lived in Australia since 2012. Because the applicant and her mother no longer have a good relationship, the applicant has not been able to produce a copy of the tenancy agreement. The rent was $200 a week.

11. In a letter dated 4 July 2024 from the applicant’s counsel to the respondent, the applicant denied that there was any agreement for sale and purchase. It was stated that the property was rented under a periodic tenancy and 90 days’ notice to terminate was given because the premises were to be put on the market.

12. However, by the time of the hearing, the applicant’s position had changed in that it was agreed that at least there had been an agreement for sale and purchase.

13. It was not disputed that in 2017, the applicant approached the respondent to discuss the applicant’s need to sell the property. They entered into a verbal agreement that the respondent would purchase the property.

14. In most respects, the parties agree on the terms of that agreement:

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15. In summary, there is no dispute that:

a. the premises are residential;

b. initially there was a tenancy agreement;

c. subsequently there was a “rent to buy” agreement on the following terms;

i. The purchase price was $125,000.

ii. The respondent paid a deposit of $33,000.

iii. The rent would increase to cover mortgage, insurance and rates.

d. the respondent has made weekly payments;

e. the respondent has paid the regional rates to [NAME];

f. the applicant has paid the District Council Rates and the insurance on the property.

g. the respondent has had a caveat placed on the property.

16. The respondent also described the maintenance he has undertaken on the property, including:

a. installation of a 1.8 metre coloursteel back fence;

b. installation of ceiling and underfloor insulation;

c. renovation of washhouse;

d. renovation of the front bedroom;

e. new tapware;

f. alarm systems;

g. security lights;

h. repairs to guttering;

i. repairs to roof leak;

j. replacement of the oven.

17. None of this was in dispute.

Applicant’s evidence

18. The applicant’s evidence was in the form of an email to her lawyer.

19. The applicant said that in early 2017 she and the respondent met to discuss the house. He was not in a position to secure finance in order to buy it. The parties agreed that the respondent would purchase the house for $125,000 and would pay a deposit of $33,000.

20. The applicant said that they agreed he would pay for the house within 5 years but planned on paying it off in a couple of years as he was expecting to have another

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$20,000 in 6 months and planned on paying similar amounts every 6 months to get it paid off and into a trust for his children as soon as he could. She said the agreement was that he would cover the expenses in relation to the house.

21. The applicant later contacted the respondent to let him know that [NAME] was requesting the house to be part of the matrimonial settlement that they were discussing in what she described as a difficult divorce. She said that the respondent was abusive, saying it was his house and he was not giving it up. The applicant said that the respondent asked if she would put in writing their agreement outlining what he had paid and what they agreed for him to pay over 5 years.

22. The applicant said that the rates are $79.47 per week and the insurance is $100.21 a fortnight. She said that the tenant has not covered those amounts.

Respondent’s evidence

23. The respondent’s evidence was that there was no mention of a 5-year deadline. He said that the respondent had told him that at the rate he was paying off her mortgage, it would take 8 years to own the property and that he should increase his weekly payments by $46.00 per week to cover the District Council rates and insurance. For the regional rates, he was to pay it when the bill came in the mail, which he did. He produced a copy of a message dated 4 January 2018 which includes:

Hey Jake just touching base with you after our call before Christmas…You had mentioned seeing if you could access money to lower the final house amount and hold the house till we got a deal sorted. I’ve spoken to the [COMPANY] and to continue at a floating rate at $200 a week the remainder of the loan would be over 8 years with this option you can pay extra lump sum payments which would reduce your loan time. With the repayments weekly you need to factor in the insurance and the rates which are roughly $75 a week.

24. The respondent produced a copy of another message sent by messenger. The date is unclear. It reads:

Hey Jake I haven’t had a chance to transfer the funds from the account to over here but I was going to leave some in there as there 2 insurances that come out and I need to work out who to change it with so it can come out of my account here if I can as I think it’s a mortgage protection insurance. Also just to let you know your payment is $220 a week that you pay so needs to be an extra $46 to make up the total payments. Also I have an overdraft on the account which costs $5 a month did you want that to stay or nah you ok.

25. The respondent said that the applicant had told him that he did not need to fill out any paperwork because the mortgage was still under her name.

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26. The respondent produced copies of [COMPANY] statements showing that from December 2020 he has been making weekly payments of $46.00 to the respondent and her partner. He also provided copies of [COMPANY] statements showing a payment of $220 per week.

27. The respondent provided a copy of a message that he received from the applicant telling him that [NAME] wanted a share of the property. He also provided a screenshot of a message from [NAME], saying that he had witnessed the parties agree that the respondent would purchase the property for under a rent to buy agreement and that the respondent would pay weekly mortgage payment for the duration of the loan or until the balance remaining on the house is paid in full.

28. The respondent produced a further screenshot of a message dated 12 December 2019, which included the following:

Though I’d just let you know you need to increase your payment by $5 a week the rates and insurance an(d) mortgage payment has all gone up slightly. I’ve been pretty slack and haven’t checked but got a letter from the [COMPANY]. And to be honest I didn’t think it’d been that long but it’s coming up 2 years in January.

29. The [COMPANY] statements show that from 2 January 2020 there was an automatic payment to the applicant and her partner of $226.00 per week.

30. The respondent said that he had offered to make a further payment of $7,000 but that was declined.

31. The respondent produced a copy of an email dated 28 May 2021 from the applicant. It reads:

In July 2017 there was a mutual agreement made between myself and Jake regarding the property at 8 Arran place. Due to Jakes financial position and being unable to mortgage the property there was an agreement made to purchase the property for $125,000 with a 33k down payment and the intention that Jake would pay the mortgage payment and rates/insurances involved with the property. There was no official paperwork signed in regards to this but a firm verbal agreement in which Jake would attempt to have mortgage paid in 5yrs with the intention he would make extra payments as able to clear the debt.. At the time of the arrangement there was roughly 10yrs remaining on the loan.. Once payments had been completed the property was then to go into trust for Jake. Currently at this stage Jake has fulfilled his requirements and made all payments.

Applicant submissions

32. In her submissions, [NAME] said that as the verbal agreement was limited in time, if the respondent could not pay the remaining purchase price within five years, the verbal agreement would lapse.

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33. During this time, the respondent would continue to reside at the property as his primary residential premises as a tenant. [NAME] said that the purpose of the verbal agreement was to support the respondent to enter the housing market when he could not secure a loan through the [COMPANY]. In return the applicant was willing to forego 5 years of potential property value increase, on the basis that the respondent agreed to pay rent, all expenses, rates and insurance and the remainder of the mortgage on the property.

34. [NAME] said that the verbal agreement has lapsed and has been void since July 2022.

35. In 2024 the applicant again needed to sell the property, and on that basis issued the respondent with a 90-day notice stating the last day of the tenancy will be 8 October 2024.

36. Upon the respondent not vacating the property, and no resolution being reached, the applicant made an application to this Tribunal on 2 December 2024.

37. The applicant requires the property to be sold in vacant possession.

38. [NAME] referred to a Tribunal decision of Nevard v Peters [1995] RTHNZ 4 Tenancy Tribunal 373/95, where the landlord and tenant entered a signed “lease to purchase agreement” for fixed term of 3 years with rent to be paid weekly. The case considered whether the Residential Tenancies Act 1986, section 5(1)(o) exemption applies (that the Act does not apply where the tenant was purchaser of premises under an agreement for sale and purchase with the landlord as vendor).

39. The exclusion did not apply as the tenant only had an option to buy under the lease to purchase agreement – where the lease to purchase agreement set out further required specified terms of the offer to be accepted and complied with. The case states: “An offer to sell is capable of being converted into an agreement for sale and purchase if the specified terms of the offer are accepted and complied with”

40. The case draws a distinction between an offer to sell and a finalised sale and purchase agreement. Specifically, that “until such time as the tenants entered into an agreement to purchase the premises the landlord and tenant relationship between the parties continues to be covered by the Act”. Therefore the Tribunal have jurisdiction under the Act.

41. [NAME] submitted that the verbal agreement had various specified conditions and not all were accepted and complied with. The applicant acknowledges that there was partial performance of the verbal agreement, namely that the initial payment of $33,000.00 was made and the respondent paid the weekly rental sum and contributed to [NAME] rates, although this was done without the applicant’s authorisation.

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42. It was submitted that crucial aspects of the verbal agreement were not met, including not meeting the purchase price within 5 years.

43. It was submitted that the applicant would never have agreed to any agreement where the respondent could take an infinite amount of time to repay $125,000. While the applicant was willing to forgo up to 5 years of capital growth, with the reassurance the respondent would pay the sum sooner, the applicant was adamant that 5 years was the limit. The CV of the property is now $475,000.

44. The applicant restructured her mortgage on a floating rate so that she would not incur early payment fees.

45. [NAME] argued that in any contract, certainty of terms is crucial. The term of the date when the funds needed to be transferred is a crucial term. Either uncertainty of this term or its omission (as is the respondent’s position that he had an infinite amount of time to repay a fixed purchase price) renders the contract a nullity.

46. The applicant’s position is that the verbal agreement had sufficient certainty on the timeframe the respondent needed to pay the remainder of the purchase price. That expired in July 2022. As such, the verbal agreement has been void since then.

Respondent’s submissions

47. For the respondent, [NAME] submitted that the parties entered into an agreement in July 2017 on the following key terms:

a. Purchase price: $125,000.

b. Deposit: $33,000 (which represents 26.4% of the purchase price).

c. Payments: The Respondent to pay the mortgage, rates and insurance on the Property.

d. Once the Applicant’s mortgage on the Property was repaid, the Property would be transferred to the Respondent.

48. [NAME] submitted:

a. These are the terms in the email dated 28 May 2021.

b. The message dated 4 January 2018 references an 8-year time frame for repayment of the applicant’s mortgage.

c. The messages reference payments to cover the rates and insurance and that an agreement was entered into between the payments.

d. An email form [NAME] advises that he witnessed the agreement between the parties.

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49. [NAME] submitted that the applicant has provided no evidence that the agreement between the parties was “revocable at will” and that agreements that are “revocable at will” are very uncommon and such a provision cannot reasonably be implied in this situation. The onus is on the applicant to prove that the Agreement was revocable at will, and she has not done so. It was submitted that the crux of the dispute relates to the enforceability of the agreement that was entered into between the parties. Until that matter has been determined by the High Court, the applicant cannot assert that 5(1)(o) of the Residential Tenancies Act does not apply.

Discussion

50. Under section 77(2) of the Act, the Tribunal has jurisdiction to determine whether any premises are at any material time, residential premises to which the Act applies and whether there is or was at any material time a tenancy agreement to which the Act applies and to determine the terms of and the parties to any such agreement.1

51. Section 82 of the Act gives the Tribunal exclusive jurisdiction to make determinations, unless certain exceptions apply, neither of which are relevant here.2

52. There is no dispute that there was an oral agreement for sale and purchase of the premises. Although under section 24 of the Property Law Act 2007, such an agreement should be in writing to be enforceable, the law relating to acts of part performance is not affected.3

53. It is not precisely clear when the agreement commenced, or what the proposed time frame was for completion.

54. The statement purportedly from [NAME] does not advance matters. It is not sworn or signed and, in any event, provides two possible formulae: one that the purchase would be completed on repayment of the (applicant’s) loan; and one that it would be completed on payment of the purchase price. Those are not the same thing. There is no evidence before the Tribunal of the amount owing on the loan in 2017 or at the date of the hearing.

55. I do not find that the agreement between the parties was the same as that in Nevard v Peters [1995] RTHNZ 4 Tenancy Tribunal 373/95, where there was an option to purchase. In this case, there has been an actual agreement for purchase.

1 Section 77(2)(a) and (b). 2 The exceptions are where proceedings were commenced in another court or body before the commencement of the Act or where an order has been made under section 83(2) of the Act transferring the proceedings. 3 Property Law Act 2007, section 26.

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56. In Xu v Meng [2021] NZHC 1936, the parties had an oral agreement for sale and purchase, the defendants moving into the premises. They agreed on the purchase price, a deposit and that they would pay the mortgage, rates and insurance up until settlement. The agreement was conditional on the defendants obtaining finance. In order to obtain finance, the defendants needed a written agreement for sale and purchase and so they lodged a caveat to protect their interests as conditional purchasers. The High Court sustained the caveat until a date to enable the purchasers to obtain finance. The caveat lapsed when the defendants did not confirm finance. In that case the High Court found that the defendants had never been tenants. When the caveat lapsed, they did not become tenants.

57. The High Court said:

[34] If the defendants were tenants, then they would, on the face of it, be the tenants of a residential premises subject to the Residential Tenancies Act 1986. However, purchasers under an agreement for sale and purchase are expressly excluded from that Act. That is no doubt a recognition of the fact that a different legal regime applies, namely ss 28 and 29 of the Property Law Act 2007 where a purchaser is in possession. Section 29 of the PLA requires a vendor seeking to cancel an agreement for sale and purchase where the purchaser is in possession, to give a notice to the purchaser that complies with specified, mandatory statutory criterion. …

[35] The exclusion of the RTA does not provide a complete answer to the question of whether the tenancy exception to Part 13 of the High Court Rules arguably applies here. It does, however, provide an indication that a purchaser in possession is in a different legal relationship with the owner of the property (than a tenant) and is subject to a different legal regime.

58. In [NAME], no rent was paid. In the present case, rent was paid between 2013 and 2017, but from then on, the payments were not rent but a long-term payment plan for purchase of the premises.

59. The parties do not agree on whether the agreement is at an end. The applicant says it has ended. Whether the agreement was for 5 years or for 8 years must be determined on the circumstantial evidence. In the correspondence between the parties, the first mention of a 5-year term was in an email dated 28 May 2021. In earlier correspondence, the applicant herself referred to an 8-year term, which would take the end of the agreement to between mid-2025.

60. However, even if it was for 5 years, there is no evidence of an agreed term that if the purchase was not completed within 5 years, or if the respondent breached a term of the agreement, the arrangement between the parties would then default to a residential tenancy agreement.

61. I accept the respondent’s submission that the applicant has provided no evidence that the agreement between the parties was revocable at will by the vendor. Nor do I find that the applicant has expressly revoked the agreement.

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62. I also find that this case differs from the Tribunal’s decision of New Zealand Asia- Pacific Cultural Exchange Centre Limited v Wang [2023] NZTT 4611374 where almost simultaneous agreements for tenancy and for sale and purchase were entered into. On 25 November 2021 the parties signed a standard form fixed- term tenancy agreement commencing on 1 December 2021 and ending on 25 March 2022. On 26 November 2021 the same parties entered into a sale and purchase agreement with a settlement date of 25 March 2022. Settlement was then deferred to 17 February 2023 and the parties agreed that the tenant would pay rent of $1,000 per week from 23 March 2022. The adjudicator found that the parties had contracted back into the Residential Tenancies Act under section 8 because there was no evidence that the parties agreed when executing the agreement for sale and purchase one day after signing the tenancy agreement, that the tenancy agreement would be cancelled or otherwise not further operative. The adjudicator found that there was “compelling evidence that when the parties entered the tenancy agreement on 25 November 2021, that they had intended that agreement to apply until the settlement date.”

63. In this case there is no evidence that the parties have contracted back into the Residential Tenancies Act. In conclusion, the applicant has not established that the respondent’s occupation of the premises is pursuant to a residential tenancy. The agreement is excluded under section 5(1)(o). The respondent is the purchaser of the premises under an agreement for sale and purchase with the applicant as vendor, and it is not an agreement that is revocable at will by the vendor.

64. Where there is no tenancy agreement, the Tribunal has jurisdiction to evict squatters under section 65, which provides:

65 Eviction of squatters

(1) Where, on the application of any person entitled to possession of any residential premises, the Tribunal is satisfied that any other person is in possession of the premises as a squatter or trespasser, or otherwise than pursuant to any right of occupation granted to that person by any person having lawful authority to grant that right to that other person, the Tribunal shall make a possession order granting possession of the premises to the applicant.

(2) Nothing in subsection (1) shall limit or affect the provisions of the Trespass Act 1980, or any other remedy that may be available to the person lawfully entitled to possession of the premises.

(3) To avoid doubt, the Tribunal has jurisdiction under this section even though the premises are not subject to a tenancy agreement.

65. In the present case, I am not satisfied that the respondent is a squatter or trespasser or that he is in possession “otherwise than pursuant to any right of occupation granted” by the applicant. The applicant has not established that the

https://www.legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM36926

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agreement for sale and purchase has been revoked, cancelled or ended in any way. Accordingly, I cannot make an order under section 65. It is not within this Tribunal’s jurisdiction to determine whether the caveat should be sustained.

66. The applicant’s applications are therefore dismissed.

[NAME]

9 April 2025

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Please read carefully: Visit justice.govt.nz/tribunals/tenancy/rehearings-appeals for more information on rehearings and appeals.

Rehearings You can apply for a rehearing if you believe that a substantial wrong or miscarriage of justice has happened. For example: • you did not get the letter telling you the date of the hearing, or • the adjudicator improperly admitted or rejected evidence, or • new evidence, relating to the original application, has become available.

You must give reasons and evidence to support your application for a rehearing. A rehearing will not be granted just because you disagree with the decision. You must apply within five working days of the decision using the Application for Rehearing form: justice.govt.nz/assets/Documents/Forms/TT-Application-for-rehearing.pdf

Right of Appeal Both the landlord and the tenant can file an appeal. You should file your appeal at the District Court where the original hearing took place. The cost for an appeal is $260. You must apply within 10 working days after the decision is issued using this Appeal to the District Court form: justice.govt.nz/tribunals/tenancy/rehearings-appeals

Grounds for an appeal You can appeal if you think the decision was wrong, but not because you don’t like the decision. For some cases, there’ll be no right to appeal. For example, you can’t appeal: • against an interim order • a final order for the payment of less than $1000 • a final order to undertake work worth less than $1000.

Enforcement Where the Tribunal made an order about money or property this is called a civil debt. The Ministry of Justice Collections Team can assist with enforcing civil debt. You can contact the collections team on [PHONE] or go to justice.govt.nz/fines/civil-debt for forms and information.

Notice to a party ordered to pay money or vacate premises, etc. Failure to comply with any order may result in substantial additional costs for enforcement. It may also involve being ordered to appear in the District Court for an examination of your means or seizure of your property.

If you require further help or information regarding this matter, visit [NAME]/disputes/enforcing- decisions or phone Tenancy Services on [PHONE].

Mēna ka hiahia koe ki ētahi atu awhina, kōrero ranei mo tēnei take, haere ki tenei ipurangi [NAME]/disputes/enforcing-decisions, waea atu ki Ratonga Takirua ma runga [PHONE] ranei.

A manaomia nisi faamatalaga poo se fesoasoani, e uiga i lau mataupu, asiasi ifo le matou aupega tafailagi: [NAME]/disputes/enforcing-decisions, pe fesootai mai le Tenancy Services i le numera [PHONE].

https://www.justice.govt.nz/tribunals/tenancy/rehearings-appeals https://www.justice.govt.nz/assets/Documents/Forms/TT-Application-for-rehearing.pdf https://www.justice.govt.nz/tribunals/tenancy/rehearings-appeals/ https://www.justice.govt.nz/fines/about-civil-debt/ https://www.[NAME]/disputes/enforcing-decisions https://www.[NAME]/disputes/enforcing-decisions http://www.[NAME]/disputes/enforcing-decisions/

Reasons Agreed facts Applicant’s evidence Respondent’s evidence Applicant submissions Respondent’s submissions Discussion