Tenancy Reforms making Tenant liable for Accidental and Intentional Damage

July 31, 2019

in Property

The Residential Tenancies Amendment Bill (No 2) passed its third reading in Parliament last week bringing about significant reforms to the Residential Tenancies Act 1986.

Of particular importance is the Bill redresses issues relating to liability for accidental and intentional damage to rental properties caused by the Tenant and now includes damage caused by contaminants such as methamphetamine contamination.

The 2016 Court of Appeal case of Holler & Rouse v Osaki set in motion a precedent that if the Landlord is insured, the Tenant is able to rely on the Landlord’s insurance to cover accidental damage to the premises caused by carelessness without imputing the Tenant for such damage. In the Osaki case the Tenant left a pot of oil unattended on high heat causing a fire in the kitchen and extensive damage to the property. The Landlord’s insurer AMI covered the damage caused by the fire however exercised its right to pursue the Tenant for the costs of the damage but the claim remained unsuccessful despite the appeal.

The decision has been cited in many Tenancy Tribunal cases and has incited further litigation dealing with the extent of the Tenant’s exoneration of liability and distinguishing between accidental and intentional damage. Essentially the onus falls on the Landlord to provide evidence that shows that the damage caused by the Tenant or their guests was intentionally caused. This means that children drawing on walls or pets wrecking carpets are the liability of the Landlord as it cannot be proved that such damage was intentional.

Practically speaking Landlords are unable to withhold the Tenant’s bond to fix damage caused by Tenant’s or use the bond towards payment of its insurance excess. Landlord’s can therefore often find themselves out of pocket and usually before the Tenancy Tribunal seeking relief where the parties are unable to agree who is liable.

The latest amendments to the Residential Tenancy Act will however see Tenants being held liable for accidentally or intentionally causing damage to the premises and the Landlord will be able to claim the insurance excess or the equivalent of up to four weeks rent from the Tenant, which ever is the lowest. Once the Bill has been passed Landlords will be required to disclose insurance related details in the Tenancy Agreement setting out the insurance excess amount, risks insured against and specify such acts and/or omissions that will require the Tenant to make good such damage.

The amendments also include rights of rent recovery and termination of the tenancy where methamphetamine or other contaminants have been found at the property, and the Landlord will have a right of entry to test for such contaminants.

With the changes to come Landlords will need to ensure that their Tenancy Agreements are updated to reflect not only insurance disclosure and liability clauses but also statements in respect to the Landlord’s compliance under the new 2019 Healthy Homes standards for insulation and heating.

If you require any advice or further information on the matters dealt with in this publication please contact the lawyer at Farry and Co. who normally advises you, or alternatively contact:

Cornelius Botha
09 353 6677
cbotha@farry.co.nz

 The information contained in this publication is intended as a guide only.  It does not constitute legal advice and should not be relied upon as such.  Professional advice should be sought before applying any of the information to particular circumstances.  While every reasonable care has been taken in the preparation of this publication, Farry and Co. does not accept liability for any errors it may contain. 

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