The Residential Tenancies Amendment Bill
Public submissions have been called on the Residential Tenancies Amendment Bill (No 2) which covers three key areas - unlawful rental properties,mMeth in rental properties and fixing up the debacle of tenants not being responsible for damage that they cause.
Measures to address tenants not being responsible for damage cannot come fast enough, so the NZPIF welcomes this part of the Bill. Tenants will once again be responsible for their damage, however it will be limited to the landlords insurance excess or four weeks rent (whichever is lower) for each incident of damage.
Although the proposed changes are significantly better than the current situation, it is a complicated fix that doesn't address all the issues raised by the Osaki case.
If the Bill is passed into law, Landlords applying to the Tenancy Tribunal for damage caused by their tenants may first need to get their insurers decision on how they judge the damage. Consider damage to carpet costing $1,000 where the excess is $1,000 and the rent is $250 per week. If the insurer views the damage as four separate incidents then four excesses apply and they won't pay anything to the landlord. However if the Tribunal views the damage as one incident of damage, then the tenants responsibility is limited to $1,000 and the landlord will be $3,000 out of pocket to put the damage right.
To address this problem, the NZPIF will be recommending that the Bill be amended so that the Tribunal is compelled to follow the insurers assessment of the number of incidents. It just isn't fair that landlords could be held financially responsible for their tenants damage when they cannot get insurance to cover the cost.
However there are other problems with this section of the Bill. Discussions with insurers reveal that they are not happy with the proposal as they lose their right of subrogation. They also believe that tenants will be less likely to take care in the property if their responsibilities are minimised. Because of this they are likely to increase premiums for rental properties.
Previous to the Osaki case, it was only tenants that didn't have contents insurance who were at risk so these are the tenants that the Bill is aimed at. However these tenants won't be as protected as they might think.
Taking the above example, if the Tribunal found that there were four incidents of damage to the carpet then the tenant would be up for the full $3,000 repair bill. If the tenant had contents insurance it is likely that they would be covered for the damage or at least have a lower excess level than the landlord.
So in summary, landlords are still at risk of paying for their tenants damage, insurers risks increase and they are likely to increase insurance premiums, 43% of tenants don't need the Bills protection but are likely to receive rent increases because of it and tenants without contents insurance probably still need it anyway.
A simpler solution is to revert back to the old system but with a requirement for landlords to advise tenants that they are responsible for damage they cause, that this could be the cost of the entire building and that contents insurance will protect them from not only this risk, but other accidental damage they cause.
We think this would be simpler, fairer, wouldn't adversely affect insurance companies or tenants with contents insurance and allow other tenants to make an informed choice about whether they want contents insurance or not.