The recent court decision in Holler v Osaki can be summed up using two words: Insurance and Intention. The ruling means residential landlords are now liable for accidental damage caused by tenants. This relates to your insurance excess, because if a tenant causes ‘accidental damage’ less than your excess, then you will have to pay for the damages.
According to Auckland District Law Society vice president Joanna Pidgeon “Most residential tenants would not have had personal liability insurance to protect them from a situation where they unintentionally caused damage. And most would have presumed that the property was insured and that they have some protection from that insurance, so the decision [Holler v Osaki] puts that assumption into effect.”
Following on from the ‘Osaki ruling’ the Tenancy Tribunal issued a practice note stating that 1) if it is established that damage to a rental property was due to carelessness and 2) the landlord has insurance, then 3) the tenant does not have to pay for the damage. The tenant must show the damage wasn’t intentional.
Problems with the new ruling soon surfaced when a Tribunal adjudicator found in favour of a Foxton tenant who let her dogs urinate in the house – even though the tenancy agreement had specified no pets were allowed. Although the tenant had breached the agreement, the adjudicator found it had not been established that the tenant had intended to damage the carpet and the cost of replacement fell on the owner.
A new Tribunal ruling in another tenant damage case where the carpet and curtains in a room of a rental property were damaged by five cats that were kept closed in the room, found in favour of the landlord. The adjudicator declared the tenant had “made decisions about the use of the room where her actions would clearly lead to damage to the carpet and curtains and concluded that the tenant’s actions were intentional and found her liable for the damage”.
This latest ruling may help other landlords win Tribunal decisions in cases of proving intent. We also know the Ministry of Business, Innovation and Employment is consulting with insurers, landlords and tenants on the matter of how best to put some of the burden back onto tenants to pay for any damage they cause to their rented homes.
Tenancy.co.nz director Scotney Williams states, in the meantime, landlords should not forsake the legal process in cases of accidental damage. “Landlords should go to the Tribunal and argue their case. If they are not happy with a decision, they should appeal to the District Court. They shouldn’t give up on the process based on what the law is at the moment.”
So landlords, make sure you are insured and check your excesses. Does your insurance policy charge an excess per ‘event’ (e.g. each hole in a wall in a property may have its own excess) or one excess for all damage?
If you’re unsure about your ability to recover costs from tenants for damage caused to your residential property contact one of our property team at Gallie Miles.