KEY POINTS:
Proposals to change the law so personal liability of more than a million tenants is limited have inflamed the Insurance Council and landlords.
Minister for Building and Construction Clayton Cosgrove has proposed amendments to the Residential Tenancies Act which would give tenants more power if houses they rented
were damaged.
Last week the minister also announced the changes would apply to retirement villages, boarding houses and other forms of assisted living.
Cosgrove is proposing that tenants' liability would be limited to four weeks' rent if they could prove that any damage to a property was caused carelessly and that they did not act recklessly or intentionally or they did not personally cause the damage.
But Insurance Council chief executive Chris Ryan said he was concerned about the proposed changes on tenant liability.
Insurance premiums could rise to compensate for landlords carrying more liability and that could push up rents, he said.
A previous attempt to push through a law change like this this year had failed, he said, after the council spoke out strongly against it.
Andrew King of the Auckland Property Investors Association said the proposed law change could put landlords in an impossible situation.
"Tenants could trash the place, then leave and say they didn't mean to," he said.
King was also surprised this law change had made its way into the latest revamp of the act. A private member's bill, proposed by Labour MP Maryan Street, was rejected by the Social Services Select Committee.
The Residential Tenancies (Damage Insurance) Amendment Bill was criticised by the Insurance Council of New Zealand and the Real Estate Institute which made submissions.
Her move was sparked by a Dunedin case where a student flat burnt down and damages were claimed from its tenants. A ministerial spokesperson said the key to the changes was limiting liability for people not responsible for damage.
But Cosgrove yesterday objected to having his amendments being compared to Street's proposals and he could not understand why insurers would object to the changes.
"The insurance companies rarely go after tenants anyway, so it's not clear why these proposals would impact on insurance premiums," Cosgrove said.
"This gives insurers and landlords the ability to go after the liable party."
Nor should landlords be concerned because the law would be strengthened and clarified and the changes would put the onus where it should be - on a guilty tenant rather than on innocent tenants who were not to blame for damage to a property, Cosgrove said.
King said landlords would not approve of the proposals.
"This is a ludicrous proposal that will lead to a huge increase in costs for the industry, ultimately leading to higher rental prices.
"The proposal explicitly allows tenants to behave carelessly, cause damage to the property and not be responsible for the cost.
"An equivalent situation would be hiring a rental car, driving carelessly, crash the car and not be responsible for the repairs. I can't see that becoming law.
"More worrying, the proposal also allows tenants to be unaccountable for anyone they invite onto the property causing damage.
"Using the car hire analogy again, if you let someone else drive the rental car and they crash it, the rental company is not going to absolve you of any blame and suffer the loss themselves."
He cited the case of a Nelson landlord awarded $5000 against a tenant for damages to a property after a party. The tenant's defence was that he left the party before the damage occurred.
"Under the new proposal, this could be judged as an adequate defence and the cost of repairs falling on the landlord," King said.
"While it could be argued that the tenant didn't instigate the damage, I would argue that they are more culpable than the landlord to be held responsible for the necessary repairs. The landlord didn't hold the party."
Cosgrove said last week he plans to introduce a bill to the House in the middle of next year to amend the act.
New rights and sanctions
In September, Building Issues Minister Clayton Cosgrove proposed a series of amendments. He wants to:
* Introduce new sanctions for landlords and tenants who breach their obligations.
* Allow landlords to recover reasonable debt-collection costs incurred in enforcing Tenancy Tribunal orders.
* Allow the tribunal to make orders against guarantors.
* Create new grounds for ending fixed-term tenancies and clearer processes for renewal.
* Bring in new rights of entry for appraisals by real estate agents and building inspectors.
* Require landlords to appoint a New Zealand-based agent if they are outside New Zealand for more than three weeks.
* Clarify responsibility for outgoings, such as water charges.
Who it affects
The 2004 Household Economic Survey showed:
* New Zealand has 1.23 million people who rent.
* Statistics NZ says 464,000 houses and flats are rented.
* People spend more on housing than anything else.
* On average, 24c of every dollar goes on housing.
