It was great news that the RTA Amendment Bill was finally passed and came into law on the 31 of July 2019. The Bill improves the situation for three key issues. Tenants liability for damage, unlawful dwellings and methamphetamine.
The NZPIF pushed hard for changes in these three areas as rental providers faced uncertainty and risk from each of them. While the new laws don’t go as far as we would have liked, they are still a big improvement on the current situation.
Tenants liability for damage
Due to an incomprehensible High Court Ruling, for the past few years tenants have not been responsible for damage they unintentionally cause.
The new law gives tenants access to our rental property insurance policies and makes them responsible for either the insurance excess or four weeks rent, whichever is lower.
While this is an improvement, it does complicate the situation. Firstly it means that we will have to provide tenants with our insurance information so they know what their risk is.
Secondly, there may be confusion over the number of incidents of damage. As an example, consider carpet that has four stains on it and will cost $4,000 to replace. If the insurance company believes there are four incidents of damage and the excess is $1,000, then there is effectively no insurance pay out.
Should the Tenancy Tribunal believe there is only one incident of damage, then the tenant will only be responsible for one excess and the owner will be out of pocket by $3,000.
Should the Tribunal agree that there are four incidents of damage then the tenant is responsible for the whole $4,000. This is a substantial amount of money and may lead tenants to require contents insurance to cover themselves. Of course, if they have contents insurance then they don’t need the new law anyway, as they are already covered!
When the Bill was first drafted it explicitly stated that the tenant was responsible for each incident of damage, but this has been removed from the final law. However, then Minister of Housing, Phil Twyford, confirmed in Parliament that “a tenant will be liable for each lot of damage.”
For new tenancies from now on, landlords must make a statement in the tenancy agreement if the property is insured or not and what the excess is. Although you only have to provide this information to existing tenants if they ask for it, I think it is a good idea to provide tenants with this information up front. It is also a good idea to make them aware that their liability may be more than the level of excess in some cases.
Unlawful residential premises
The Bill allows the Tenancy Tribunal to hear cases of unlawful dwellings, meaning they are no longer restricted to giving tenants back the rent they had paid, which is excellent.
However, the Tribunal may still order the landlord to refund all rent the tenant paid if they consider the tenants health or safety was at risk.
The new Act now covers all contaminants, not just methamphetamine. The new law doesn’t actually state what the new regulations around contamination will be yet. Government will still have to provide these regulations.
However, the landlord must not rent a property if they know it is contaminated or not decontaminated in accordance with the (yet to be) prescribed decontamination process.
The new law protects landlord’s from prosecution if the regulations have been followed and Landlords now have a right to test the property for methamphetamine, which is completely necessary.
The NZPIF will be providing a lot more information to members once more information is available and the regulations are determined.