Tenancies Bill Causes more Problems than Solutions

4 August 2006

Residential Tenancies (Damage Insurance) Amendment Bill Causes more Problems than Solutions

The Residential Tenancies (Damage Insurance) Amendment Bill, currently being considered by the Social Services Select Committee, will cause more problems than it will solve according to the Real Estate Institute of New Zealand (REINZ).

REINZ’s Select Committee submission raises a number of concerns about the Bill which it says could cause some people to be unable to secure tenancy of any property. The Institute also says the Bill ignores and contravenes the principal of ‘user pays’ requiring landlords to pay an insurance premium, from which the tenants derive the entire benefit.

Mr. Howard Morley, REINZ National President, says “REINZ acknowledges that while the intent of the proposed legislation may well be well-meaning, there are a number of better ways by which the problem could be addressed. These alternatives have not been pursued and we have no doubt that the Bill, if enacted, will prove counterproductive.”

The Bill’s intent is to address a perceived unfairness in the current Residential Tenancies Act 1986 by introducing protection for tenants against personal liability for major damage caused to premises that they played no part in causing. Because tenancies are joint tenancies under common law, tenants are currently jointly and severally liable to the landlord for the damage caused to the premises. This can mean that damages caused by the negligence of one tenant could, and have, resulted in substantial liability being incurred by innocent co-tenants.

“REINZ believes an excellent alternative would be to require the tenants to take out insurance. Tenants’ liability insurance is available for under $100 a year we understand,” Mr. Morley said.

REINZ is particularly concerned about the disclosure issues implicit where individual tenants are named in the landlord’s policy. This disclosure has implications for both tenants and landlords where tenants with dubious insurance histories are involved. Landlords could find it difficult getting insurance cover in the event a tenant were to make a fraudulent or malicious claim.

Mr. Morley says, “In addition, disclosure of tenants’ names and their insurance histories could create difficulties for ‘blacklisted’ tenants to ever secure a tenancy in New Zealand.”

REINZ also recommended to the Select Committee that there was a need for a programme to educate tenants on the wisdom of taking out a contents policy that includes personal liability. This programme could be delivered by Tenancy Services by way of information sent to each tenant and also posted on the Tenancy Services website. The Institute could also provide advice to its members on an appropriate clause to include in tenancy agreements.

“Given the difficulties posed by the Bill, REINZ believes the best course of action is for the Select Committee to seek to have it withdrawn, and draw to the attention of the officials conducting the review of the Residential Tenancies Act, the alternatives raised by submitters,”Mr. Morley said.

ENDS

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