Landlords angry over rental damage ruling

Three months on from a landmark court case, landlords are angry that they cannot even claim the excess on their insurance claim when tenants damage their property accidentally.

In April the Court of Appeal ruled in favour of a couple who were pursued by the landlord’s insurer for the cost of a house fire, caused by an untended pot on the stove.

The court sided with the couple, Kenji and Tieko Osaki, and now the Tenancy Tribunal has put out a note to help clarify the ruling for landlords and tenants.

It confirms that tenants cannot be held liable for unintentional damage if the landlord is insured.

However, principal tenancy adjudicator Melissa Poole’s note says tenants or their guests can be held liable if the landlord has no insurance, or the damage is found to be deliberate.

Landlords are also not allowed to seek the excess on their insurance policies, or use 14-day notices to get tenants to repair damage. Instead they must go through the tribunal.

Insurance Council chief executive Tim Grafton said many people would be “offended by the idea that those who have negligently caused damage don’t have to face the consequences of their actions”.

However, he noted that those who acted deliberately would remain liable.

Scotney Williams, a director of tenancy services firm Tenancy.co.nz, said it would be interesting to see how the new rules played out, as the tenant had to prove the damage was unintentional and that meant showing up at court.

‘If this is the case, most disputes would be awarded to the landlord because the majority of tenants fail to turn up to their hearings.”

Williams said the Osaki decision had been a radical change from the previous understanding, which was that tenants had to pay for even careless damage.

“This is a get-out of jail free card for tenants.”

The Auckland Property Investors Association described the new law as “an alarming development,” further tipping the balance of tenancy laws in the favour of tenants.

APIA president Andrew Bruce said it set a terrible example.

“To give tenants exclusive possession (and therefore full control of how the properties are being used) but not financially disincentivise them when they fail to be responsible, is tantamount to arming a child with a livewire and a lighter and shrugging your shoulders when the bomb goes off.’

David Faulkner of Wellington property management firm Real IQ said that landlords were angry.

“One property manager based in the Taranaki has informed us that there is extra security at Tenancy Tribunal due to uneducated landlords losing their temper as they find out the impact of this decision.”

He predicted more landlords would sell their properties because of the increasing risk and costs.

“This, along with the real prospect that testing for meth may become compulsory between tenancies, will only see costs increase further.

“Mass selling of rental properties is a very realistic prospect.”

By CATHERINE HARRIS – 4 August 2016

New Landlords Special