Renters, you are not off the hook just yet
Tenants are no longer responsible for accidents, but don’t be too quick to cancel liability insurance.
ONE of my former fears was my flat burning down, flooding, or getting damaged in some other horrifically expensive way.
Unlike many people, I was fully aware that having my name on the tenancy agreement meant I’d be on the line for the costs, regardless of whose fault it was.
Tenants are jointly responsible for damage caused by anyone legally on the property – partygoer, flatmate, or tradie.
I’ve previously pleaded with renters to get liability cover, which usually comes bundled in with contents insurance and protects them from any mishaps up to $2m.
Now a landmark court ruling has changed everything.
The story starts in 2009, when an unattended pot caught fire, causing substantial damage.
The landlord’s insurer took the tenants to court for the damage. So far, so predictable.
Fast forward to 2016. The Court of Appeal released its decision on the long-running legal battle – and the tenants won.
The ruling has completely changed the interpretation of the law. The Tenancy Tribunal put out a note saying tenants are no longer liable for damage to an insured property, as long as they can prove it was unintentional.
At first glance, this is a huge win for the little guy. Some commentators even suggested renters no longer needed to waste money on liability insurance.
I’d love to agree. The coverage costs several hundred dollars a year, and unless you have really expensive stuff, the contents side of things is unnecessary.
Sadly, it’s actually dangerous advice.
I’d be nervous about not having liability cover, for three main reasons – the rules only apply if the landlord has insurance; you’re still protected if the house is damaged by fire, flood, explosion or natural disasters, but an uninsured landlord can pursue you for almost anything else; if there is damage to someone else’s property.
In other words, if you start a flood, you won’t have to pay a cent to your landlord or their insurer. However, you’re still liable for turning the rest of the apartment 123rf building into Water World. The same applies with a fire spreading to another house.
Landlords are fighting back. They’re currently planning strategies for deliberately limiting their own insurance cover to big events. That means in any situation where there’s minor damage, they can say hand-onheart that they’re not insured, meaning you’re still liable.
I never thought I’d write these words: despite the plotting and scheming, I actually feel sorry for landlords. Under the new regime, a tenant can be as ‘‘careless’’ as they want with no fear of repercussions. They don’t even have to pay the landlord’s excess.
An accidental fire is one thing – I can easily imagine making a dumb mistake like that. But we’re talking about gross negligence. In a recent case, a tenant let her dog urinate all over the carpet. Despite having signed an agreement that she wasn’t allowed pets, she was able to walk away without paying a cent.
The truth is, this is a pyrrhic victory for the renting class.
The only winners are the slobs, the negligent and the uninsured. The bulk of responsible renters lose out. Landlords are going to face premium hikes from their own insurers, and they’ll inevitably pass it on through higher rents.
They’re also going to be much more selective about tenants, because they can’t afford to take a chance on higher-risk candidates. First-time renter with no references? Not on your life. Hopeful pet owner? See ya. Family with young kids? Good luck with that.
If you were thinking of joyfully tearing up your contents and liability cover, think again. This might be a landmark decision, but it’s nothing to celebrate. Got a money question you’ve been struggling with? Want to send a bouquet or a brickbat? Email Budget Buster at meadows182@gmail.com, or on Twitter at @MeadowsRichard.