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Call for compulsory tenant insurance

With the government looking at introducing compulsory third party insurance for car drivers, New Zealand Property Investors Federation lobbyist Thomas Chin says tenants should get the same treatment.

Thursday, October 25th 2007, 12:00AM

by The Landlord

By Steve Hart

His call comes after the government announced proposals to make tenants liable to pay the equivalent of four weeks rent to cover any damage caused to property.

“It sounds good initially. But carpet is pretty expensive so I don’t think four weeks’ rent is enough to cover that cost,” says Chin. “I don’t know who thought up the idea of restricting compensation to just four weeks’ rent – clearly they have plucked the number out of the air. Why they have not proposed five, six or seven weeks I can’t imagine.”

He says the proposed change is being put forward in response to a fire caused by a student in Otago some years ago. Chin says the student left a cooker on causing the apartment to burn down. The insurance company says all the students registered on the tenancy agreement are jointly liable for the replacement cost.

“The government has taken this onboard and decided that it doesn’t sound fair and hence it wants to change the law,” says Chin. “But we have told them, along with the Insurance Council, that it was a one-off event and since that incident the insurance industry has decided that it won’t go after every tenant on a tenancy agreement – just the person responsible.”

And that, says Chin, compounds the problem for landlords.

“If the only penalty for causing major damage is no more than four weeks’ rent then tenants will think nothing of having a party, damage may be caused and the landlord then has to determine who is responsible.

“The tenant will say ‘it wasn’t me’. So what is a landlord to do?”

The answer, believes Chin, is compulsory property insurance paid for by tenants.

“If the government is entertaining the thought of compelling motorists to buy insurance, then why wouldn’t they go one more step and make insurance a condition of a tenancy agreement?

“The way I see it, that would be a benefit to tenants and protect their assets and chattels. It would be good news for the insurance industry, and for the landlord.”

 

« Tenant damage issue rears head againInspection photos may breach tenants’ privacy »

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