Tricky Matter Where The RTA Might Override Commercial Leases

[Perry]

My question is simple. Can a commercial lessee inadvertently but de
facto convert a commercial building lease into a Residential Tenancy
by - after entering into the lease - using it as a PPOR?

Hypothesis
Someone rents a commercial building from a LL and uses it as a place
to make concrete garden ornaments, selling them from the door. After
a year or two, times get tough and the lessee converts a mezzanine
storage area in one back corner into a rudimentary bedroom, making
use of the toilet and related facilities downstairs. Also adds a two-ring
gas cooker with LPG bottle and puts a washing machine next to the
existing washtub and shower, etc. The LL turns a blind eye to all that,
for whatever reason.

Have those actions converted the commercial premises into a residential
premises? The definitions from the RTA seem to imply that it does, viz.

---

Residential Tenancies Act
Interpretation
commercial premises means premises that are not residential premises
residential premises means any premises used or intended for occupation by any person as a place of residence

---

It matters not that the Deed of Lease contains a clause that might go like:

Permitted use of premises
Workshop. It is agreed that The Residential Tenancy Act is expressly excluded.
The Lessor is not providing residential accommodation to the Lessee and the
premises are not designed nor intended for such usage.

. . . as the RTA makes attempting to contract out of the RTA an unlawful act:

---

137 Prohibited transactions

(1) No person shall—

(a) enter into any transaction, or make any contract or arrangement, purporting to do, whether presently or at some future time or upon the happening of any event or contingency, anything that contravenes or will contravene any of the provisions of this Act; or

(b) enter into any transaction or make any contract or arrangement, whether orally or in writing, or do anything, for the purpose of or having the effect of, in any way, whether directly or indirectly, defeating, evading, or preventing the operation of any of the provisions of this Act.

(2) Requiring any person to enter into any transaction, or to make any contract or arrangement, in contravention of subsection (1) is hereby declared to be an unlawful act.

(3) Subject to subsection (4), any provision of any transaction, contract, or arrangement entered into in contravention of subsection (1) that would have the effect of, in any way, whether directly or indirectly, defeating, evading, or preventing the operation of any of the provisions of this Act shall be of no effect.

(4) All money paid and the value of any other consideration for the tenancy provided by the tenant (not being rent lawfully recoverable by the landlord) or, where the transaction takes the form of an option to purchase the premises to which the transaction relates, by the person on whom the option to purchase is conferred, shall be recoverable as a debt due to the tenant or prospective purchaser by the landlord.

---

If one was to take the RTA provisions generously, any commercial lease
could be turned on its head by a lessee moving in for a while, say in the
case of a marriage break-up. I suspect that sort of thing happens from
time-to-time.

Any forumite know of any case law or TT decisions or pertinent precedents?

[Keys]

For the purposes of this Act, where any premises that are subject to a legal or an equitable lease are used for both commercial and residential purposes, the premises shall be deemed to be residential premises unless it is proved that the premises were let principally for purposes other than residential purposes.

Interpretation, section 2 (3)

[Perry]

Interesting - thanks. I wonder if a Deed of Lease with that clause:
Permitted use of premises in it would constitute proof?

[Glenn]

Regardless of the issues associated with insurance and the council I can assure you that there have been several similar cases come before the tribunal in Nelson and perhaps other places. The issue is principle use. The RTA specifically excludes tenancies in commercial premises. Landlords and tenants have both brought cases to the court and the court has declined ruling on them. That is not however to say that tomorrow or next year a tribunal might suddenly for no good reason make a ruling on such a place. However the RTA does specify you can both mutually agree to be covered. If you do this then you can choose which bits of the RTA are included and excluded.

[Perry]

Landlords and tenants have both brought cases to the court and the court has declined ruling on them.

Any of them recent enough to be on the DBH web site, Glenn?
Or, as TT jurisdiction was declined, perhaps it was not reported?
If so, any idea how I could get hold of the decision and reasons?

---

Seems the e-klutzes are still at the helm @ DBH. Meditating on
the varnish or lacquer? Or should that be solvent sniffing?

Error 503 Service Unavailable

Service Unavailable
Guru Meditation:

XID: 1521062597

---

Varnish cache server

[Glenn]

I stumbled across them on the web site by scrolling through all the cases as I do to get to sleep.
I think it was in St Vincent street or Vanguard street.
Pop those two streets in and have fund.

[Perry]

Well, searching didn't succeed in putting me to sleep, but nor did
I get any relevant results, with either Vincent or Vanguard. It's
a shame there is no keyword search option, that would allow
the word jurisdiction to be searched for.

Any other suggestions, Glenn?

[Perry]

What about this one: 13/00539/NN
It seems analogous. Might it be what
you were thinking of?

[Keys]

Good work by the LL by preempting any possible claim to the TT by the tenant. A legal opinion for just $20.44. Cheap.