Tenants liable for careless damage – to a point

Tenants will now have to take some responsibility for careless damage to rental properties after the Residential Tenancies Amendment Bill (No. 2) passed its final reading in Parliament on Wednesday.

Thursday, July 25th 2019, 12:41PM 2 Comments

by Miriam Bell

Associate Minister of Housing Kris Faafoi said the legislation makes practical changes to the RTA to help ensure tenancy laws better reflect responsibility for careless damage of rental properties.

“These changes will provide greater certainty to landlords, minimise cost and risk, and ensure tenants have the right information when deciding if they will rent a property.”

Under the new legislation, tenants will be liable for careless damage of up to four weeks of rent or their landlord's insurance excess, whichever is lower. Their liability for careless damage will be capped at four weeks of market rent.

On introducing the Bill for its third reading, Faafoi said these liability settings strike an appropriate balance between keeping landlords' costs neutral as much as possible and incentivising tenants to take care of rental properties.

He said the settings will help protect tenants from excessive risks and costs and that the provision should also encourage cost-effective insurance arrangements for landlords.

The new legislation will also require landlords to disclosure their insurance information in new tenancy agreements. They will have to state whether their property is insured and, if it is insured, they must include the relevant insurance excess or excesses for the property.

Faafoi said that tenants have a right to know the level of their liability for careless damage. “Bringing the level of their liability to their attention will incentivise them to take care of rental properties.”

Landlords must provide insurance information within a reasonable time and failure to comply could lead to a penalty of up to $500.

Tenant damage liability has been a contentious issue since the infamous Osaki decision left landlords liable for accidental damage caused by tenants.

It was the widespread confusion around the issue which prompted the previous National-led government to introduce the RTA Bill (No. 2) into Parliament.

There has been cross-party support for the Bill - which also responds to concerns around meth contamination and unlawful dwellings - and yesterday MPs resoundingly voted for it to pass into law.

Meth contamination of rental properties is another fraught area and the new legislation also addresses issues around this – although it now applies to “contaminants” more generally rather than solely focusing on meth.

It sets out the responsibilities of both landlords and tenants where there is contamination in a rental property and it covers landlord rights around entering, testing, and terminating a tenancy if its contaminated.

The new legislation also contains regulation-making power, which means that any contaminant which is identified as harmful to health will be able to be dealt with by regulations.

Faafoi said these regulations will be able to set maximum acceptable levels and maximum inhabitable levels for these contaminants.

They will also prescribe methods for taking samples and testing for contaminants, prescribe decontamination processes and the way in which goods left in contaminated premises should be dealt with by landlords.”

“We are committed to making sure that tenants are living in safe homes while also making sure properties are not being vacated when the risk is low.”

The new legislation also deals with unlawful residential properties, like illegally converted garages or sleep-outs, by ensuring that rights and responsibilities under the RTA are applied. Additionally, it strengthens the law for prosecuting landlords who tenant unsuitable properties.

Read more:

Tenant damage law change 

Tenant damage liability: the Select Committee speaks 

Tenant damage liability changes unfair  

Tags: compliance damage liability house insurance insurance Kris Faafoi landlords property investment property management risk tenancy reform tenants

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Comments from our readers

On 26 July 2019 at 1:47 pm jude22598 said:
I can’t see that this will help. To claim for damage we have to be able to prove to our insurance company that it was caused in a single incident. Maybe we should do daily or even hourly inspections!
On 30 July 2019 at 12:06 pm Landlord 1000 said:
I currently have five rental properties in the Tauranga area and two in Auckland. All of these properties are clean, dry, warm homes which are maintained to a high standard and all are rental compliant. I will seriously consider pulling these from the rental pool should the likes of contamination testing become a rule.

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