A decision of the Court of Appeal in 2016 caused a stir for landlords and insurers in the residential tenancy space.  But is it really as bad as everyone thinks?  Are tenants really no longer liable for the damage they cause to a landlord’s property?

The Property team at Morrison Kent have the advice you need, to ensure you don’t get tripped up by changes to the Residential Tenancies Act.

A client recently contacted us because their tenant’s washing machine had been leaking over a long period of time.  The landlord’s insurer wouldn’t pay out (as it was gradual damage and caused by the tenant’s machine), the tenant’s insurer asserted it also wouldn’t pay out because the landlord’s insurance would cover the damage (which actually wasn’t the case) and the tenants had been told by Tenancy Services that they weren’t liable because of the Osaki case (Holler & Rouse v Osaki [2016] NZCA 130).

Our clients were obviously quite concerned about this because the leak had caused substantial damage to the subfloor of the property and the cost to repair the damage was approximately $5,000.  This landlord couldn’t understand why they should have to pay for the repairs.

The Osaki case says that where a tenant carelessly causes damage to a landlord’s property and that damage is covered by the landlord’s insurance, then the landlord (and the landlord’s insurer) cannot recover the costs of repairs from the tenant.  This does not mean that if the landlord’s insurance won’t cover the damage or the damage is intentional, that the tenant isn’t liable.

The Lesson

People often jump to conclusions based on cases or assertions about “the law”, without applying it to the particular circumstances.  If our clients hadn’t come to us for advice they would have been out of pocket approximately $5,000.

The lesson is don’t assume an outcome, each situation depends on its particular facts.  Also, the law is constantly changing with new legislation, or amendments to existing legislation, and new decisions of the Courts. 

There is a Bill currently before Parliament, the Residential Tenancies Amendment Bill (No 2), which once passed will amend the Residential Tenancies Act 1986.  The intention is to (amongst other things) clarify liability for damage caused by tenants.  The Bill, as drafted at the date of this article, generally speaking, means that:

  • tenants are not liable for damage except if the damage was intentionally done or caused by the tenant (or someone the tenant is responsible for), or if it was as a result of the tenant (or someone the tenant is responsible for) doing or not doing something on the property which is an imprisonable offence, or where the landlord’s insurance will not pay out because of something the tenant (or someone the tenant is responsible for) did or did not do; and
  • in the case of careless damage, tenant liability is limited. The amount of liability depends on whether or not the landlord has insurance.

The Bill may change before it becomes law.

For More Information

If you’ve got an issue with your residential tenancy, get in touch with us and we will be able to advise you on the law. Our property team will consider your particular circumstances and provide specific advice based on the law that applies at the time, ensuring you get the best possible outcome.

To learn more about Residential Tenancies, see our article “Residential Tenancies – An Overview”, or call our property experts Jamie Nunns on 04 495 8912 or Erica Tromp on 04 495 8904, to discuss your options.