Landlords finally have something to smile about as a second round of tenancy reforms passes!
Landlords can claim the insurance excess or 4 weeks’ rent from tenants.
Under New Zealand’s current residential tenancy laws, landlords are, in some cases, a group in their own right.
For example, in 2016, a Dunedin tenant caused a fire by leaving a pot of oil on the stove, but the court ruled that the tenant did not have to pay compensation because the damage was not intentional.
The law states that, for property damage caused by fire, flooding or explosions, landlords cannot claim compensation from tenants unless they can prove the damage was intentional, regardless of whether the landlord has insurance. In the Dunedin case, the landlord whose house burnt down could not even require the tenant to pay the insurance excess.
The ruling sparked considerable controversy, because even when tenants deliberately cause damage, landlords find it difficult to prove. Many landlords felt the ruling appeared to give tenants free rein to damage their properties.
Now, however, under a Labour government considered more sympathetic to tenants than landlords, this ‘bad law’ is finally coming to an end.
A second round of tenancy law reforms passed this Wednesday. Under the amended law, tenants must pay compensation for accidental damage they cause even if the landlord has insurance. However, compensation is capped at 4 weeks’ rent; landlords cannot demand enormous payouts.
Here are some of the new provisions:
Tenants bear some responsibility for accidental damage
Tenants will be liable for accidental damage, but only within specified limits.
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If tenants damage a property through carelessness, landlords can claim the insurance excess or 4 weeks’ rent from them—whichever is lower.
Associate Housing Minister Kris Faafoi said the reform would help reduce landlords’ costs and encourage tenants to take better care of their rented homes while keeping costs manageable.
Landlords must disclose whether the property is insured, state the amount in the tenancy agreement and provide insurance details on request. Landlords who breach these requirements face a fine of NZ$500.
Nick Smith
Former Housing Minister and National MP Nick Smith drafted these legislative reform provisions. He said: ‘If you are a tenant, remember to take care. If you carelessly leave a pot on the stove and the house is destroyed by fire, you will lose your bond, but you will not be bankrupted.’
Converted garages
In New Zealand, converting a garage into a bedroom for personal use or to rent out is common. In future, such converted accommodation cannot be rented out without consent for the conversion.
Previously, garages were outside the scope of the Residential Tenancies Act because they were not originally residential premises. Tenants living in them could not take complaints to the Tenancy Tribunal to defend their rights. The amendment closes this loophole. All buildings that people can live in, including garages, will fall under the Residential Tenancies Act.
Drug testing
Reports regularly emerge of tenants using drugs in rental properties and causing losses for landlords. The amendment also sets out provisions for drug testing in rental properties.
Hundreds of tenants had previously been evicted and fined for using drugs in rental homes. It was later established, however, that the harm caused by these drugs was insufficient to affect health. Some of those evicted should not have been held liable at all.
The amended law sets a new maximum acceptable level for residues of methamphetamine and various synthetic drugs in rental properties. It also clarifies when and how landlords should test properties for drugs.
Landlords must tell tenants whether a property has previously been contaminated. A rental property cannot continue to be rented out, or be let to new tenants, until drug contamination has been thoroughly cleaned up.
More reforms on the way
The legislative changes just passed are only part of several rounds of tenancy reform. The first round began under the previous National government and introduced minimum insulation standards for rental properties in July this year. By 2021, landlords must also bring their properties up to minimum heating and ventilation standards.
The government is consulting on other possible reforms, including limiting rent increases to once a year and removing landlords’ right to end a tenancy unilaterally without giving a reason.