Property Management Auckland

 Good News for Landlords: RTA Amendment Bill #2

Aspire Property Management Auckland owner Mike Atkinson explains how changes to the Residential Tenancies Act will change the landscape for rental properties and how they are managed.

 

What are the main changes proposed?

There are 3 main changes as part of this amendment:

 

  • Careless Damages: Tenants can now be held liable for careless damages – a very welcome and sensible change for landlords. Of course, there are limits and caveats. There’s an in-depth look into this topic below. 

 

  • Meth Testing: Landlords can now meth-test their properties without permission from the tenant. As long as landlords provide at least 48-hours notice, a tenant can no longer stop the tests from happening.

 

  • Illegally Tenanted Minor Dwellings: The Tenancy Tribunal can now govern illegally tenanted minor dwellings. If the dwelling is discovered to be unlawfully tenanted, landlords can be made to pay back all rent to the tenant, and a fine. This change impacts landlords who are renting out unconsented dwellings, and it’s also not good news for tenants as ultimately this will affect housing stock and therefore rents will increase.

The RTA Amendment Bill #2 has not yet passed. You can track the progress of the bill here it is currently before the select committee.

 

In-Depth Look: Tenants Liable for Careless Damage

 

The current RTA states that tenants shall not damage a rental property carelessly or unintentionally. However the Osaki case set a president that currently means tenants won’t be held liable for this type of damage.

 

In the Osaki case a tenant burned their rental property down by leaving something cooking on the kitchen hot plate. The landlord was paid out around $200,000 by their insurance company, who then attempted to claim this back from the tenant as they considered it careless damage. The case made it to the second highest court, the Court of Appeals, which ruled that the tenant was not liable for careless damage where it is covered by the owners/landlords insurance. A common sense victory against an insurance company trying to pass on its risk responsibility.  This, however, had an unintended consequence of releasing all tenants from careless damage provided the rental property is insured by the landlord. The Tenancy Tribunal was bound by the higher court’s decision, and it also placed the burden of evidence onto the landlord to prove that the tenant’s damage was intentional rather than careless. An almost impossible task. The result has been that for the last 18 months tenants have not been held to account for careless damage and these costs have been covered by often unsuspecting landlords. Not a great situation!

 

The amendment will correct the issue caused by the Osaki Ruling and put the liability for careless damage back onto the tenant. The amount of liability for the tenant will be for the lesser of the owner’s insurance excess or 4-weeks rent. If the item is not insured, the tenant can be liable for the full amount. The liability is on a per-event basis, so if a tenant has spilt red wine on the carpet, and there is also a soft drink stain, they would be liable for two amounts. This means there is plenty of scope to recover damage from tenants. Note the standard depreciation schedules will still apply, so if you claim full replacement of old carpet you can expect the Tenancy Tribunal to reduce the amount based on the age of your carpet.

 

This change also raises the interesting prospect of tenants requesting insurance information up front when taking properties, as their own risk is determined by the owner’s insurance policy. I do think eventually a standardised rental policy could come into play that levels the playing field for everyone. What this does not address is that claims for damage are ultimately logged against the landlord’s policy, thus affecting their on-going premiums, and having no affect on the tenant. Shouldn’t we have tenants insuring themselves and then taking their policies with them? 

 

The amendment also adds a provision making it an unlawful act for the landlord to accept or benefit more than the prescribed amount (4-weeks rent or the insurance excess per event).

 

For example:

 

Tenant A pays $400 per week rent and the owner has an excess of $500 on their insurance.
Tenant A spills red wine on the carpet resulting in a bill for $2000 to replace the section of carpet. The tenant feels bad and offers to pay the full amount to the landlord. The landlord accepts the amount. The landlord has now committed an unlawful act as the maximum they can accept is the lower of either 4-weeks rent (4 x $400 = $1600) or the excess ($500). The amendment has not specified what damages will be attached to the unlawful act but we expect it to be high ($1000 $4000). You can expect tenancy adjudicators to take a very dim view of any landlords who try to circumvent the prescribed amounts.

 

In summary:
  1. Tenants again liable for careless damage up to the value of your excess or 4 weeks rent (whichever amount is lower)
  2. It is on a per-event basis
  3. Accepting more is an unlawful act and you can expect to have significant damages awarded against you

 

Tell me more!

Read the whole Bill here: 

  

Aspire Property Management is one of Auckland’s leading property management companies. If you have a property in Auckland and you are not sure how these changes will affect you or you are not happy with your current property manager please reach out to us here. We are happy to help and provide advice regardless of who looks after your rental properties.