It’s not uncommon for a tenant to send a message notifying you of maintenance issues that have arisen. In fact, they are legally obligated to do so. Yet now the message may not be as frustrating for a landlord as it has been. Ever since the highly contentious issue of the Osaki case in 2016 where a tenant was found not to be liable for accidentally setting fire to the kitchen whilst cooking in a rental property, the debate has been heated about what landlords should have to pay for and what tenants should have to pay for. In the most part, landlords came off second best. Damage caused by a tenant, unless it could be proved that it was intentional or caused through a way of living which would inevitably cause damage to the property was fixed at the cost of the landlords insurance, driving their premiums and excess payments, up. Yet now with the Residential Tenancies Amendments Bill (number 2) being ready in Parliament, all of that could be set to change. What does this mean for your tenancies moving forward? Will this change the landscape of renting yet again? Or does it just set a precedent for more confusion and disputes between landlords and tenants?
If the recommended amendments from the bill are passed, it would be the case that landlords who have reports of damage from tenants could pass the cost of remedy onto the tenant to the value of four weeks rent, or the cost of the excess payment from the landlord to their insurance company, whichever was the lesser. In some cases, this could leave tenants facing a large bill which would usually have been picked up by the landlord. However, while this may seem like a huge victory for landlords, property investors still carry the burden of ensuring that they have an extensive insurance policy to cover all eventualities when it comes to the damage that is caused by the tenant. Should the landlords’ insurance not provide enough cover, it is also conceivable that the price paid by the tenant will not cover the price for fixing the damage done and consequently, leave the landlord to collect the shortfall again.
So if the onus still very much sits with landlords to cover additional costs of insuring property, what does that mean for the price of rentals? Well, it could be safe to assume that as long as landlords continue to encounter additional costs, that this, coupled with the shortage of rental property available, rents should, on the whole, continue to rise. Although the bill is not yet passed, we could face a situation similar to the anticipation of the Healthy Homes Guarantee Bill and the change in legislation regarding insulation, where landlords chose to increase rents ahead of the introduction date for the bills and create a buffer to be able to comfortably afford the work which needed to be done. As we approach the annual, busy summer season, landlords may choose to increase their rents in what will already be a difficult time for tenants.
So if tenants could be held liable for damages and costs, how does that impact them? Well aside from the obvious financial obligations, tenants may need to begin to explore tenants’ insurance to cover themselves in the event that they find themselves liable for damage that they cannot afford to pay. This additional cost will inevitably eat into the budget of prospective tenants and could impact the amount that they could pay for a property – and whilst it is not currently a part of the Amendments Bill, common sense would suggest that most tenants should want to protect themselves in the event of accidental damage. Similarly however, with tenants being liable for damages across the board, you may find that they take a more proactive approach to caring for investment properties. The fear of being hit with a large bill for the cost of the landlords’ insurance excess, tenants who are not able to pass off all damage as ‘accidental’ would be much more cautious, resulting in a higher quality of care for your property and thus the property being returned in a better condition at the end of the tenancy.
In the grand scheme of things, should this bill be passed it would be conceivable that fewer disputes would arise between tenant and landlord in the long run. Whether it’s because tenants are taking greater care of properties or because the lines of liability are made less blurry, the bill can only be a good foundation to benefit the relationship between landlord and tenant. Yet in the short term at least, it will certainly lead to much more confusion. Whilst the Tenancy Tribunal adjudicators try to get their head around the new ruling, you can rest assured that different interpretations of the bill will be made and consequently disputes will arise. As a property investor, it will be important to cover all bases. For obligation-free advice on what you can do to protect yourself against damage in your rental property, or to find out where you stand in a dispute with your tenants, feel free to give us a call anytime on 04 381 8604.