How can we help?

Can I hold my tenant responsible for damage?

A landlord can hold their tenant responsible only in certain circumstances. Tenancy Tribunal decisions are an insight into how landlords and tenants are interacting. We show you how we think the Residential Tenancies Amendment Act 2019 is working for landlords and how it interacts with landlord insurance.

landlord_insurance_tenant_damage

Three things you should know about tenant damage

1. A tenant can be held fully responsible for intentional damage

A tenant who deliberately causes damage can be held liable, and the landlord can request that the tenant pays for damage.

If the landlord has insurance for deliberate damage they can lodge a claim with their insurer. The insurer will pursue the tenant to pay back for the costs, including the landlord’s insurance excess.

2. A tenant can be held partially responsible for careless damage

If a tenant carelessly causes damage they can be held responsible, but only to the insurance excess or four weeks rent (whichever is less).

The landlord’s insurance policy also benefits the tenant. If the tenant carelessly damages the property they can rely on the landlord’s insurance policy to cover the cost of the damage. The tenant’s liability should be considered on a per event basis, meaning that if there have been multiple events of careless damage, the tenant (and the landlord), can be up for more than one excess. Learn more about excess per event.

3. A tenant cannot always be held responsible for accidental tenant damage

Where damage caused by the tenant is accidental, the responsibility can fall back on the landlord. This means the landlord pays the landlord insurance excess.

This is a fundamental flaw with the August 2010 change to the act which is silent on ‘accidental damage’, as it’s not always clear whether tenant damage is ‘careless’ or ‘accidental’. Doing something like knocking and leaving a hot iron on the carpet is not considered careless by the Tenancy Tribunal, and is therefore the landlord’s responsibility to pay the insurance excess. See Braziers Ltd v Guttmann [2020] TT 4251455.

__________________________________________________________________________________________________________________

A case of melted carpet

This case shows the Tribunal’s approach to the difference between careless damage and accidental damage. It confirms the two types of damage are treated differently when determining tenant responsibility and ultimately who pays the landlord insurance excess.

Braziers v Guttman 2020

A landlord (Braziers) took their tenant (Guttmann) to the Tenancy Tribunal to obtain compensation for damage. The Landlord alleges that a patch of the living room carpet was melted during the tenancy, and claims the cost of replacement of the carpet in that room from the tenant of $772. The tenant accepted that the surface of the carpet was melted when they accidentally knocked over a hot clothes iron. The tribunal confirmed that;

  • The landlord must prove that damage occurred during the tenancy and is more than fair wear and tear, and if established the tenant must;
  • Prove that they did not carelessly or intentionally cause or permit the damage.

The Tribunal commented that where the damage is caused carelessly, and is covered by the landlord’s insurance, the tenant’s liability is limited to the lesser of the insurance excess or four weeks’ rent.

he tribunal decided that damage to the carpet was more than fair wear and tear, but because the damage was accidental rather than careless or deliberate, there is no liability to the tenant. The tenant was not held responsible for the cost to replace the carpet and was not held responsible for the insurance excess.

See the full details of the Tenancy Tribunal case Braziers Ltd v Guttmann [2020] TT 4251455

Search other Tenancy Tribunal Decisions

__________________________________________________________________________________________________________________

Accidental Tenant Damage vs Careless Tenant Damage

The Residential Tenancies Act 2019 has done a poor job at defining a difference between accidental and careless damage. The act is silent on accidental damage caused by tenants, and we are now seeing this in the Tenancy Tribunal.

Accidental damage is something caused by the tenant, but is outside of the control of the tenant (e.g. accidentally tripping over and causing damage). Whereas careless damage is loss that is caused through lack of attention or concern.  The Act holds the tenant partially responsible for the careless damage but it is silent on accidental damage.

All damage caused by the tenant, whether accidental or careless should be the responsibility of the tenant (meaning the lesser of landlord insurance excess or 4 weeks rent). But unfortunately that is not how the Act has been interpreted by some recent Tenancy Tribunal cases.

If the landlord and tenant cannot agree whether the tenant is liable for the damage, the landlord can apply to the Tenancy Tribunal for the matter to be resolved. Copies of relevant insurance policies, photos of the damage, and receipts or quotes for repair should be included to support the application.

__________________________________________________________________________________________________________________

Why can’t the tenant use their own insurance to pay for the damage?

Gone are the days where tenants were completely responsible and carried their own insurance, which the landlord or the landlord’s insurer could rely on to pay for the cost of damage to a rental property. Historically the tenant could carry their own contents insurance cover, and this cover would include the tenants liability of at least $1m. For many landlords it became a condition of the tenancy that the tenant provided confirmation of their own contents insurance cover. This meant that if the tenant burnt the house down the landlord’s insurance company could get the money back from the tenant’s insurance company.

Two major things changed this approach:

  1. Court of Appeal decision on the Holla v Osaki
    This was a landmark ruling for landlords. It established that landlords and landlord insurers could no longer recover the costs of damage from tenants.  In this case it was a $216,000 worth of damage caused by the careless action of tenant by leaving an unattended pot cooking on the stove. Learn more about this decision here.
  2. Residential Tenancies Act 2019
    This act reverses the affects of the Holla v Osaki decision by:
    • Bringing back some responsibility for tenants who cause careless damage. This responsibility is limited to the lesser of the landlord’s insurance excess or 4 weeks rent.
    • Establishing that the tenant is fully responsible for intentional damage and that the tenant cannot rely on the landlord insurance policy for this. Note that tenant contents insurance policies do not provide cover for damage that is intentionally caused.

___________________________________________________________________________________________________________________

Important: We believe that for the benefit of landlords, and to avoid confusion, accidental tenant damage and careless tenant damage should be treated exactly the same.  Meaning that the tenant should be held responsible and therefore pay the applicable landlord insurance excess (or up to 4 weeks rent whichever is less).  Initio calls on the Government to provide guidance or better still, update the legislation so that it is clear.

Learn more about landlord insurance:
Comprehensive Landlord Insurance Guide – Learn more about what is landlord insurance.
Initio Landlord Insurance – Learn about specialist landlord insurance cover with initio.