Recent changes to the Residential Tenancies Amendment Bill (No 2) in July 2019 see landlords having more protection over accidental damage caused by their tenants. Tenants are now unable to rely on their landlord's insurance for damage they cause to the rental property. They are also liable for accidental damage to rental properties. If damage is caused to the property, tenants will either pay the landlord's excess or four weeks rent, whichever is the lesser.
Decision in Holler v Osaki
The changes have come about due to the Court of Appeal decision in Holler v Osaki.1 In March 2009 the tenants put a pot of oil on the stove on maximum temperature and left it unattended for five minutes. It caught fire and caused substantial damage to the house. The owners of the house had insurance with AMI. AMI covered the cost of repairs totaling $216,413.28.
AMI sought the repair costs back from the tenants. After a lengthy legal dispute, the matter ended in the Court of Appeal. The main issue was the relationship between the Residential Tenancies Act 1986 (RTA) and the Property Law Act 2007 (PLA).
The Court of Appeal had to consider whether sections 268 and 269 of the PLA also applied to residential tenancies. These sections provide that a landlord cannot require their tenant to pay for damage caused, unless the damage was intentional or criminal. Section 40 of the RTA contains residential tenants' main responsibilities, including paying the rent, keeping the premises clean and tidy and not intentionally or carelessly causing damage to the premises. Section 142(1) of the RTA provides that: "Nothing in Part 4 of the Property Law Act 2007 applies to a tenancy to which this Act apply". Further, section 8(4) of the PLA provides that if the PLA is inconsistent with a provision in another enactment, the provision of the other enactment prevails.
Nonetheless, the Court of Appeal held that the PLA applied to residential tenancies and AMI could not recover any costs from the tenants, even their excess.
Holler v Osaki left landlords liable to pay for damage caused by tenants. In effect, the tenants were able to benefit from the landlord's insurance even though the damage was a result of their negligence.
The Residential Tenancies Amendment Bill (No 2) legislates against the approach taken in Holler v Osaki. Landlords now have more protection for damage caused by their tenants.
Further changes in the Bill
The Bill has also made the following changes:
- Landlords must disclose to tenants in the tenancy agreement whether they have insurance and for how much. Landlords must also make a copy of their insurance policy available upon request from the tenant.
- Tenants can leave with two days' notice and claim rent payments back if they rented an unlawful premise such as an unconsented garage or sleepout. A landlord or tenant may apply to the Tenancy Tribunal for an order terminating the tenancy on the ground that the premises are unlawful residential premises.
- Landlords must disclose to tenants whether the property has been contaminated with methamphetamine in the past. Further, landlords who are testing for contaminants must tell the tenants what contaminants they will be testing for and provide them with a copy of the results.
1 Holler v Osaki  NZCA 130.
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