Prior to the decision reached in the case of Holler v Osaki tenants were liable for fair wear and tear, and for careless damage. In Holler v Osaki the Court of Appeal decided in general terms that Tenants were not liable for careless damage. The effect has been that all claims to the Tenancy Tribunal for careless damage have been declined since April 2016.
Careless damage is not defined in the Residential Tenancies Act but is generally characterised as negligence, lack of care, or lack of forethought. The question has been expressed by the Tenancy Tribunal as, “Was the tenant exercising that degree of care and attention that a reasonable and prudent tenant would exercise in the circumstances?”
The Government has decided to amend the RTA to give Landlords and Tenants some certainty. The new bill states that a tenant can be held liable for careless damage up to the lesser of a Landlord’s insurance excess or four weeks’ rent. However, the Tenant will be fully liable when damage:
- Is intentional OR
- Caused by an act or omission by the tenant or by any person whom a tenant is responsible AND
- Occurred on or about the tenancy premises AND
- The act constitutes an imprisonable offense.
Where the landlord has no insurance, they can claim the whole of any loss for careless damage.
Where the landlord has insurance the tenant will be liable:
- Per incident of damage – importantly follows insurance protocol
- For the lesser of the Landlord’s insurance excess but no more than the equivalent of 4 weeks’ rent.
The Tenant can make repairs to rectify the damage where agreed with the Landlord. The limit on the value of repairs remains at 4 weeks’ rent equivalent or up to the Landlord’s excess. The intention of the act is for Landlords to benefit from the changes rather than insurance companies. The Landlord cannot accept more than the 4 weeks’ rent or they are committing an unlawful act.
The change needed to happen to provide certainty for Landlords and Tenants. We would expect most damage claims will be covered under a Landlord’s insurance excess or the 4 weeks’ rent per incident.