A tenant burns down a house, leaving the landlord unable to recover the loss: New Zealand’s property market is full of pitfalls!

Disputes between landlords and tenants frequently end up before the Tenancy Tribunal and appear in the news from time to time.

 

One case that many Chinese people found particularly difficult to understand involved a fire in 2016.

 

A tenant accidentally started a major fire while cooking, but the tribunal ruled that the tenant did not have to pay compensation because the fire was not deliberate.

 

The case was controversial because even when tenants deliberately cause damage, landlords find it difficult to prove. Many landlords felt such a ruling appeared to give tenants free rein to damage their properties.

 

LJ Hooker property management manager Robin Yang said some landlords still faced losses despite having insurance. Even with insurance, losses are not covered in full: policyholders must pay an excess, which they cannot recover from tenants either.

 

In such cases, landlords seeking compensation from tenants must prove that:

{Ad}

 

1. The property damage exceeds fair wear and tear.

 

2. The tenant caused the damage deliberately.

 

The Property Law Act 2007 provides that, in commercial tenancies, landlords cannot seek compensation from tenants for accidental damage from fire, flooding and similar events where the loss can be covered by insurance. A ruling in a residential tenancy dispute in 2016 effectively extended this provision to residential tenancies.

 

Consequently, for property damage caused by fire, flooding or explosions, landlords cannot claim compensation from tenants unless they can prove the damage was deliberate, regardless of whether the landlord has insurance.

 

This makes it extremely difficult for landlords to secure compensation in practice.

 

Robin Yang

 

Among cases brought before the Tenancy Tribunal, landlords’ claims against tenants clearly outnumber tenants’ claims against landlords or property management companies. Andrew King, chief executive of the New Zealand Property Investors’ Federation, said New Zealand law was heavily stacked against landlords.

 

So how can landlords protect themselves from unscrupulous tenants, and how can tenants avoid traps set by unscrupulous landlords?

 

Common reasons tenants are taken to the Tenancy Tribunal

 

LJ Hooker property management manager Robin Yang said tenants generally became respondents for 3 reasons.

 

1. Rent arrears.

 

2. Disappearing without paying the rent.

 

3. Failing to pay water, electricity or other charges they had agreed to cover.

 

When landlords or property management companies become respondents

 

Two relatively common reasons landlords or property management companies become respondents are:

 

1. Inadequate property maintenance, such as smoke alarms that do not work or mould in rooms.

 

2. Landlords inspecting the property without giving notice.

 

3. Tenants wanting to end their tenancy early.

 

Cultural differences mean some Chinese landlords will drop into their rental property when passing to check its condition and see whether anything needs repairing. They may mean well, but in New Zealand, inspecting a property without notifying the tenant is strictly prohibited.

 

Pitfalls landlords and tenants should avoid in their dealings

 

Both landlords and tenants may encounter dishonest people in the rental market.

 

For example, landlords are responsible for ensuring smoke alarms work. Sometimes, when a landlord has bought a new smoke alarm and is ready to install it, the tenant may say, “The house is a bit untidy. Leave it there and I’ll install it myself later.”

 

But the tenant may then forget to install it. If the matter subsequently goes to the Tenancy Tribunal, the landlord may still be held responsible.

 

Robin Yang said that, to avoid unnecessary trouble later, landlords and tenants should follow these principles when communicating:

 

1. Always have a tenancy agreement. Ideally, ask a professional or someone experienced to check it for pitfalls.

 

2. Take photographs before tenants move in. These can serve as evidence for a compensation claim if the property is damaged later.

 

3. During the tenancy, both parties should keep written records wherever possible and avoid communicating by phone.

 

4. Landlords and tenants should avoid becoming too personally involved and should communicate their needs through the property manager wherever possible.

 

The standard process for New Zealand’s Tenancy Tribunal is:

 

1. Both parties submit their documents. Once the evidence is complete, the tribunal schedules the case, with mediation available after a wait of 3–6 weeks.

 

2. If mediation fails and the parties cannot reach agreement, a hearing can be held after a wait of 3–6 weeks.

 

If tenants remain in the rental property after the hearing, or new disputes arise over property damage or rent arrears, another application to the Tenancy Tribunal may be necessary. The process can be exhausting and time-consuming.

 

Landlords seeking peace of mind are best advised to leave their property with a property management company and let professionals handle the work. Property managers deal with many tenancy disputes and have more experience resolving them.