Ouch! Absent or defective insulation statement could set y​ou back $500

From 1 July 2016, all new residential tenancy agreements are required to include a signed insulation statement detailing the extent of insulation in the
property.  At the time of passage, this requirement was seen by many as a bureaucratic intermediary in anticipation of universal insulation by
2019.  But if its recent orders are anything to go by, it is apparent that the Tribunal has every intention to audit this particular obligation
under the strictest of interpretation. 

Insulation statement at a glance 

Amendments to the Residential Tenancies Act in 2016 (commonly referred to as that for ‘minimum standards’) obligate the landlord, amongst other things,
to disclose the extent to which the rental property has been insulated in the form of a signed statement.
 This statement has to be a part of any new tenancy agreement.  The landlord commits an unlawful act under the RTA if said statement is absent,
defective, or contains false or misleading information.  An exemplary damage of up to $500 is awardable in
the case of a breach.

The anatomy of an insulation statement 

At a minimum, the insulation statement must include: 

• Whether or not there is insulation;
• If there is insulation, where it is – the extent and location in ceilings, floors or walls and in rooms or parts of rooms;
• What type of insulation product is installed, and its level of thermal resistance (R-value) if known; 
• What condition the insulation is in including information such as whether there is damage to or dampness detected on the material as well as whether
  any is not secured to the property; 
• The landlord’s signature (that is separate from the signature on the agreement). 

• An outline of what information is missing about that location;
• An explanation as to why the information cannot be gathered; 
• A confirmation that the landlord has made all reasonable efforts to get that information and has been unsuccessful. 

Where landlords become unstuck

A good way to understand common mistakes in this respect is to consider the below Tribunal orders:

• In Johnson, Richard vs Sherburn Family Trust and other parties an exemplary damage of $150 is awarded for a lack of an insulation statement.  Note that the tenancy agreement was entered into in February
  2017.  It wasn’t until August 2017, in a counterclaim, that the tenant alleged the breach. The adjudicator scales penalty back after considering
  whether the breach was intentional and whether it would be just to impose maximum fine having regard to all the factors set out in section 109(3) of the RTA.  The landlords’ subsequent action (i.e. arranging for insulation assessment) was also a mitigating
  factor considered.
• In Pal, David vs Street Smart Property Management Limited,
  the tenant is awarded a total of $470.44 (made up of compensation, exemplary damage, and filing fee) for defective and misleading insulation statement.
   Compensation ($300) is awarded on the basis of the tenant incurring additional electricity and heating costs during the tenancy while
  the exemplary damage ($150) speaks to the tenancy agreement stating that the property was ‘insulated’ when it was not. 
• In Brittain, Amy vs Redcoats limited as agent for Ed Bosson and Neryn Bereton,
  the tenant’s claim for compensation (relocation costs) and exemplary damage (for lack of insulation statement) is rejected.  Though circumstances
  of this case bear resemblance to Johnson (though not entirely similar).  The adjudicator is not satisfied by the tenant’s claim that
  had she received the insulation statement at the time of the agreement, she would not have entered into the tenancy.  The adjudicator considered
  also that the landlords are unlikely to repeat the offense.  The outcome is that claims for compensation and exemplary damage are declined
  and the agreement canceled. 
• In Inspire Property Management Limited vs Saheb, Farisha Fareen,
  the tenant seeks to invalidate a fixed-term tenancy on the basis that the provided insulation statement in the agreement had not been filled out
  by the landlord.  The Tribunal surmises that though a failure to provide an insulation statement is an unlawful act, the failure to fill out
  a provided statement does not itself invalidate the agreement.  No exemplary damage or compensation has been awarded for the defective insulation
  statement in this case. 

• Signed insulation statements must be included at the start of the tenancy; 
• A defective, absent, or misleading insulation statement is sometimes used by tenants in counterclaims at the time of dispute; 
• So far, no tenant has been successful at invalidating the entire tenancy on the basis of an absent or defective insulation statement.  It is worth
  noting that the Tribunal does not appear to find such a claim repugnant as so far cases have failed on evidence rather than the substance of the
  argument;
• An absent or defective statement could lead to both compensation (electricity, heating, relocation costs) and exemplary damage; 
• If you entered into a tenancy agreement after July 2016 without supplying an adequate insulation statement but have since remediated the breach then
  the remediation itself can mitigate potential damage awarded to the tenant. 

• Arrange for an insulation assessment from a qualified assessor.  We recommend contacting Kevan Hunt from The Insulation Warehouse Limited* for a complimentary assessment.  TIWL is also offering APIA members excellent discounts on insulation
  installations and top-ups;  
• Set up an insulation statement template to insert into all future tenancy agreements.  The Tenancy Services template is a good starting point; 
• If you have an installation or assessment certificate issued by an insulator, there is no harm in appending a copy to the tenancy agreement alongside
  the insulation statement; 
• If practicable, take the tenant through the property (ceiling and underfloor) to show him/her the insulation before obtaining the signature on the
  tenancy agreement, document in an email that you had shown them the insulation on site. 
• If your property is not yet insulated then it would be prudent to start making plans to do so as compliance date (July 2019) is right around the corner.
   You will also be interested to know that our Property Management Partner, Barfoot & Thompson, is offering to contribute 50% of either
  your floor or ceiling insulation with a management package before 30th November 2017.  Click here for more information.