More clarification needed on tenant damage

Saturday 11 February 2017

Landlord-friendly court ruling in Foxton tenant damage case is a step in the right direction but commentators say greater clarification is needed to resolve the issue.

By Miriam Bell

Following a Tenancy Tribunal ruling which absolved a tenant who let dogs urinate throughout her rental property of responsibility, landlord David Russ appealed the ruling to the Palmerston North District Court.

The District Court judge found in his favour, saying the Tribunal ruling was wrong and the damage caused by the tenant qualified as intentional not accidental – and this made her liable for costs.

Landlords nationwide have greeted the decision as a blow for common sense amidst the fallout from the notorious Osaki case, which left landlords liable for accidental damage caused by tenants.

NZ Property Investors Federation executive officer Andrew King said the decision has clarified that the original Tribunal ruling was incorrect.

“Many of the Tribunal adjudicators probably thought that it was a bad decision too and were left struggling with how to rule on tenant damage cases as a result. So this decision will help there.”

Despite this, the Tribunal is not a court and there can be great variances between adjudicator rulings, he said.

“For this reason, the decision will not necessarily set a precedent. But some landlords might look at the decision and think it is worth appealing a similar Tribunal ruling on tenant damage.”

In King’s view, this is important because the issue of tenant damage liability remains unresolved and very much in flux.

Building Minister Nick Smith has proposed a law change that would mean tenants would be liable for damage of up to four weeks' rent or, if it was more, the landlord's insurance excesses.

However, consultation on the minister’s proposal is ongoing.

King said it is good that the government is doing something to address the situation and the new proposal will work.

“But there are still some fishhooks in it which might cause problems. We have made some suggestions to government that would improve it, so it remains to be seen what happens.

“Whatever the case, the government’s move is a step in the right direction.”

Auckland District Law Society vice president Joanna Pidgeon also said that greater clarification on the issue is needed.

She agreed with the judge’s interpretation that the damage in the Foxton case was intentional as it was due to a deliberate breach of the tenancy agreement which specifically prohibited pets.

“If tenants deliberately breach the terms of their leases, they should be held accountable for the resultant damage.”

Pidgeon said the case will set a precedent and will help landlords to hold tenants accountable for damage in such situations, which are different from accidental damage in more one off situations.

However, further clarification of various relevant points is necessary, she said.

These include legislative intentions in relation to the Property Law Act exoneration where landlords are insured and the question of whether there should be different treatment of commercial and residential tenancies with two different pieces of legislation covering each.

Read more:

Tenant damage ruling overturned 

Insurance shake up: the Holler & Rouse vs Osaki decision 

Tenants could face limited liability for some damage

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