Landlords cry foul over tenants’ damage cap

Landlords are worried they could be left with a big bill for tenant damage, if the proposals in a select committee report are taken up. The select committee considering the Residential Tenancies Amendment Bill has suggested a significant change to tenant liability for careless damage.

It had been proposed that tenants be liable for an amount equal to four weeks’ rent, or the landlord’s excess

– whichever was lower, per incident.

But the select committee has recommended removing the ‘‘per incident’’ directive.

It is common for one insurance claim to cover several ‘‘incidents’’ – such as damage to carpet in several rooms or a fire – triggering claims on each policy.

NZ Property Investors Federation executive officer Andrew King said it was a concern. ‘‘It’s not a very fair situation.’’

In one case dealt with by the Insurance and Financial Services Ombudsman, a landlord made a claim for damage caused by tenants.

There were stains on the carpet in the lounge and two bedrooms, ripped vinyl in the laundry, broken glass in a window and lifting laminate on a kitchen bench.

The insurer paid a cash settlement of $2010 for the flooring damage, deducting $500 in excess per room because the damage was caused by different events.

In that scenario, the tenant would only be liable for a maximum $500 – the excess for one incident – while the landlord paid $2000.

King said his organisation would write to MPs and urge them to consider the

problems with the committee’s suggestion.

‘‘Part of the whole point was to give the tenant the protection of the landlords’ insurance but you can’t cherry-pick which bits you like and which you don’t.’’

Insurance Council chief executive Tim Grafton said landlords already had the right to retain a tenant’s bond if a property was not left in ‘‘suitable condition,’’ and that was often four weeks’ rent.

‘‘The recommended Residential Tenancies Amendment Bill does nothing to change this. Thus, there is no increased incentive for a tenant to take good care of their landlord’s property.

‘‘This could mean that damage costs increase over time, which may lead to premiums increasing for landlords. These increases will, we believe, inevitably be passed on to all tenants by way of increased rents.’’

Grafton said another consequence was that tenants might see less reason to take out contents insurance to protect themselves against damage to their landlord’s property, as their liability was capped at such a low level.

But debt collection company TPS Credit Control general manager Josh Martin said the impact would be limited.

‘‘In the tens of thousands of tenancy debts lodged through TPS Credit Control, the average debt is only $1800,’’ he said.

‘‘The damage aspect of tenancy debts is usually around 30 per cent. With the average rent in New Zealand currently being $433 per week, and $555 in Auckland, most damage claims will be covered.’’

Andrew King, NZ Property Investors Federation ‘‘It’s not a very fair situation.’’