New tenant damage, meth measures are only partial solutions

Friday 26 July 2019

Changes to the legislation around tenant damage and meth contamination have been years in the making but now they are finally here are they any good for landlords?

By Miriam Bell

This week measures aimed at tackling several contentious tenancy issues passed into law as the Residential Tenancies Amendment Bill (No. 2) sailed through its final reading in Parliament with unanimous support.

The issues addressed include tenant liability for damage, meth contamination of rental properties and unlawful residential dwellings, like illegally converted garages.

For NZ Property Investors Federation executive officer Andrew King, there’s no doubt that the new legislation is an improvement on the problems and confusion that previously surrounded these issues.

He says the NZPIF is extremely pleased that tenants are now at least partially responsible for the damage they cause to their rental property.

Prior to the Court of Appeal’s controversial Osaki decision in 2016, tenants had always been responsible for damage that they caused to their rental property.

But the Osaki decision changed that and left landlords paying for accidental damage caused by tenants. The NZPIF has been lobbying for change ever since.

The passing of the RTA (No.2) Bill means that tenants are now partially responsible for damage they cause, limiting their liability to the lower of four weeks rent or the landlord’s insurance excess.

King says that while this is considerably better than the current situation, it is quite a complicated solution and could still lead to injustices for both tenants and landlords.

“Landlords will have to provide insurance information to their tenants, tenants’ liability will be determined by the amount of rent they are paying and the landlords excess rather than any relevance to the actual damage.

“Both landlords and tenants may have to pay considerable amounts of money depending on how many incidents of damage the insurer and Tenancy Tribunal decide have occurred.

“Nonetheless, to get this partial solution to the problem of tenant liability for damage is great.”

King takes a similar view of the new measures around meth. He says the legislation clarifies a number of issues but doesn’t settle the confusion around meth levels.

That’s because while last year’s Gluckman report recommends there should be a minimum standard of 15 micrograms per 100cm2 for meth contamination, the standard that is officially in force is the NZS standard of 1.5 micrograms per 100cm2.

The Tenancy Tribunal, the Real Estate Authority and Housing NZ have all adopted the Gluckman standard, but insurance companies have not – and are unlikely to do so until there is an official change.

However, change is likely to come in this area too. It’s just uncertain when.

Under the new legislation the Government has been given regulation-making power, which means that any contaminant identified as harmful to health will be able to be dealt with by regulations.

Such regulations will be able to set maximum acceptable levels and maximum inhabitable levels for these contaminants, as well as make specifications about testing.

King says it seems likely that new Government regulations will be consistent with the 15 mg standard recommended in the Gluckman report recommended levels.

“The problem is that until those new regulations are developed, landlords are still in limbo. Given the Tribunal now uses the Gluckman recommended standard of 15 mg, it’s reasonable to say we can go on that.

“But there’s still some resistance to that and we won’t know for sure what the situation is until new regulations have been developed and made public.”

However, it’s good there is now a definition of contamination and clarification on issues like habitability, testing and decontamination processes, he says.

And as for the unlawful dwelling provisions? In King’s view, they too partially address the problem, but not fully and leave lots of grey areas.

“There is a better definition of what constitutes an unlawful dwelling and it gives the Tribunal more scope in hearings, to make awards and to dismiss claims. But how it will work in practice will come down to how the chief adjudicator determines it.”

It would pay for people who do have unconsented dwellings on their properties to address the issue in order to keep safely on side with the law, he adds.

Not all investor advocates are happy with the legislative changes though. Stop the War on Tenancies spokesperson Mike Butler says they amount to political tinkering which will serve to make tenancy law more complex and litigious.

“The architect of this bill, Nick Smith, and the current Minister responsible, Kris Faafoi, should explain how limiting a tenant’s liability for the accidental destruction of, let’s say, a $500,000 house, to four week’s rent, is either fair or just.”

Butler says Tribunal hearings concerning damage will become more complex and many more cases will be appealed through the court system, especially because of issues around how damage is categorised.

“Regarding contaminants, the issue of evidence of harm has been avoided, and the bill assumes that current level of 15 millionths of a gram per 100 square centimetres is a meaningful indicator of harm, which it is not.

“The legislation should have simply stated that the onus was on anyone claiming harm from a contaminated tenancy to provide evidence of harm.”

He also says that treating garages as residential premises to extend coverage of the RTA to them so that they are confirmed as non-residential is the sort of thing that gives rise to the expression “the law is an ass”.

“This legislation, that seeks to clean up messes created by the Tenancy Tribunal, the Court of Appeal, and the previous Government, has just made the issues more unfair and complex and litigious.”

Read more:

Tenants liable for careless damage - to a point 

Comments from our readers

On 28 July 2019 at 3:02 pm Unhappy Landlord said:
I have had enough of bring a landlord, and now will be selling up due to high tax, and costs involved not being able to claim. Why give tenants a home they don't appreciate an abuse, then having to go through the drama of recovering cost for damages so time wasting.

Sign In / Register to add your comment

Property News

Development focus for new Hamilton-Auckland partnership

Investors looking for future growth hotspots should keep an eye on the “Hamilton-Auckland Corridor” after New Zealand’s first urban growth partnership was signed on Thursday.

House Prices

Pushing up the national average price

The main centres used to drive New Zealand’s market but it was strong provincial markets that contributed to the national average asking price’s rise in July.

Commercial

Join the office space revolution

Flexible working spaces are more than just a fleeting trend and the launch of a new co-working serviced office franchise programme will open up the market to investors.

Mortgages

OCR cut could prompt housing market upturn

The Reserve Bank’s decision to slash the Official Cash Rate (OCR) by 0.5% to a historic low of 1.0% has shocked the financial community, but what could it mean for the housing market?

Site by PHP Developer