Tenancy reforms make tenants liable for damage, and allow prosecution of landlords who rent out garages

Tenants will soon have to pay for any accidental damage they make to a rental property - rather than rely on landlords' insurance.

But the amount will be capped at four weeks' rent, so landlords cannot cripple them with huge bills.

The change comes after a landmark court case in which the owners of a Dunedin house which burned down were not even able to claim the insurance excess back for the damage.

It is part of a series of measures passed into law yesterday with unanimous backing.

Here is what the changes will mean for landlords and tenants.

TENANT DAMAGE

Tenants will now be liable for accidental damage, but only to a specific limit.

If they carelessly damage a property, the landlord will be able to claim back their excess or four weeks' rent - whichever is lower.

Associate Housing Minister Kris Faafoi said the liability was set at a rate which balanced landlords' costs and encouraged tenants to look after their rental property while not facing excessive costs.

Landlords will have to say whether they are insured and for how much in the tenancy agreement, and make any insurance details available on request. If they don't they can be fined $500.

The changes came about after a Court of Appeal ruling. In 2009, tenant Tieko Osaki put a pot of oil on the stove which then caught fire and burned down the Dunedin house she was renting with her husband.

The owners had insurance with AMI, which covered the $216,000 cost of the repairs. AMI went after the tenants for the costs and after a long legal battle in several courts it was decided that the owners could not even claim back their excess, let alone damages.

It was also determined that tenants did not have to pay damages if the landlord had insurance.

The decisions frustrated landlords, who felt they carried too much of the burden for damages.

Former Housing Minister Nick Smith, who drafted the latest law change, summarised how it would work: "If you're a tenant, if you're careless, if you leave a pot on the stove that results in a house burning down, you will lose your bond - be careful - but you won't be bankrupted".

GARAGES AS HOUSES

Landlords will no longer be able to rent out garages or other unconsented spaces without fear of prosecution under tenancy laws.

A gap in the law meant that if tenants living in illegal dwellings wanted to take action, they were unable to take their landlord to the Tenancy Tribunal because their property was not covered by the Residential Tenancies Act.

The latest law change extends tenancy laws to all buildings intended for living in, even if they are illegal. This means tenants who are housed in a garage or rundown dwelling can take their landlord to the Tenancy Tribunal, and will be able to get their rent payments back.

"This change will confirm once and for all that the Tenancy Tribunal has full jurisdiction over all rental properties and rental premises, lawful or otherwise," said Faafoi.

The Ministry of Business, Innovation and Employment's tenancy compliance team will be able to pursue landlords who rent out unconsented spaces.

METH TESTING

The law change also sets up a new regime for meth-testing rental properties.

It follows the meth-testing debacle in which hundreds of tenants were evicted and fined for meth contamination which were at harmless levels, and in some cases which they were not even responsible for.

It will set a new maximum acceptable level for contamination - not only for meth but other substances including synthetic drugs. It will clarify when and how landlords should have to test their properties.

Landlords will have to tell tenants if their property has been contaminated in the past. And they cannot continue to rent out a property, or begin a new tenancy, if a contaminated house has not been cleaned up.

MORE TO COME

The latest law changes are part of several rounds of tenancy reform. The first, which began under the previous Government, introduced minimum standards for insulation in July. By 2021, landlords will also have to meet minimum standards for heating and ventilation.

And the Government is consulting on changes which include limiting rent rises to once a year and getting rid of no-cause tenancy terminations.

The Salvation Army said it wanted the tenancy reforms to go much further, because tenants were still vulnerable.

"Our clients who are renting accommodation that is by nature unlawful and unsuitable for themselves or their families, such as garages and unsafe boarding houses, do not have choice, or alternatives. They only do so because it is the only place they can access, or afford."

The Sallies want wholesale reform, including more secure tenancies, tenancy advocacy services funded by unclaimed bond money, and tougher sanctions for landlords who break the law.