Tenant damage law change

Wednesday 24 May 2017

Landlords could soon have better protection in cases of tenant damage if a new Bill passes into law – but an investor advocate argues it doesn’t go far enough.

By Miriam Bell

Meth contamination and tenant damage liability have been the two most difficult issues facing landlords over the past year.

The controversial Court of Appeal Osaki ruling which left landlords liable for accidental damage caused by tenants and a now notorious Tenancy Tribunal decision on the issue served to make matters worse.

In response to the fallout, the government started consulting on potential law changes to address the issue.

That process has culminated in the introduction of the Residential Tenancies Amendment Bill (No. 2) into Parliament.

Building Minister Nick Smith said the Bill implements changes regarding liability for careless damage which arose from the Osaki decision.

“Under the Bill, tenants will be liable for the cost of their landlord’s insurance excess up to a maximum of four weeks’ rent for each incident of damage caused by carelessness.

“A tenant remains fully liable where the damage is deliberate or a criminal act, and the landlord liable for fair wear and tear and damage beyond the control of the tenant, like a natural disaster.”

Smith said the changes are needed to ensure that tenants have an incentive to take good care of a property and for the landlord to have appropriate insurance.

However, the NZ Property Investors Federation feels the Bill could go further.

NZPIF executive officer Andrew King said they were pleased some action is being taken to ensure tenants were held responsible for accidental damage to rental properties.

“But the general principle of the Bill is that tenants are still not liable for accidental damage they cause and this is very disappointing.

“Under the Bill, if tenants cause any damage to their rental property, they will only be liable for the cost of their landlord’s insurance excess up to a maximum of four weeks’ rent for each incident of damage.”

King said that if a landlord’s insurance company and the Tenancy Tribunal can’t agree on how many incidents of damage are involved, a landlord might still be liable for a majority of the cost for their tenant’s damage.

The NZPIF is also concerned that the Bill talks about careless damage, he said.

“This means tenants may not be accountable for any accidental damage they cause. Deciding what is accidental and what is careless damage could be very problematic.”

King said the simplest solution would be to return the whole issue of tenants’ liability for damage back to how it was before the court ruling.

Along with the changes relating to tenants’ damage liability, the Bill also includes provisions to aid better management of meth contamination and the tenancy of unsuitable properties like unlawfully converted garages or industrial buildings.

Smith said that, under the Bill, landlords will have easier access to test for meth and tenants will be able to terminate their tenancy if it presents at unsafe levels.

“This Bill recognises that meth contamination of properties has become a significant issue that needs clearer direction. We want homes to be safe but we also don’t want properties being vacated when the risks are low.”

It will also ensure that the contamination thresholds in the new meth testing and remediation standard, which is due out around June, are legally recognised and enforceable before the Tenancy Tribunal.

Smith said the Bill will provide better protection and clarity for tenants and landlords and will help the residential tenancy market function more effectively.

Read more:

Tenants could face limited liability for some damage 

More clarification on tenant damage needed 

Eagerly awaited meth standard delayed 

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