A common question we recieve through our consultancy line is about tenant liability for careless damage.
If the insurance company rejects the insurance claim, are tenants liable for the insurance excess or four weeks rent?
This week’s Decision of Interest explores this question & more.
Legal Authorities
The tenant may be responsible for damage to the premises under certain circumstances outlined in the RTA.
Landlords must demonstrate that the damage occurred during the tenancy and exceeds normal wear and tear.
Unless tenants can prove they did not cause or permit the damage, they may be held liable (Sections 40(2)(a), 41, and 49B RTA).
Section 49B of the RTA applies specifically to damage occurring after August 27, 2019, with a presumption that damage occurred after this date unless proven otherwise.
If the damage is deemed careless and falls under landlord insurance coverage, the tenant’s liability is limited to the insurance excess or four weeks’ rent, as stipulated in Section 49B(3)(a) RTA.
However, if the damage is deemed careless but is not covered by insurance, the tenant’s liability is limited to four weeks’ rent, as outlined in Section 49B(3)(b) RTA.
Additionally, tenants are responsible for intentional damage or damage resulting from imprisonable offences, as per Section 49B(1) RTA.
Damage is classified as intentional if a person deliberately causes harm or knowingly allows a situation to persist, as established in the legal precedent of Guo v Korck [2019] NZHC 1541.
Why is there confusion?
The Template sentence used in many Tribunal orders says this:
Where the damage is careless and is not covered by the landlord’s insurance, the tenant’s liability is limited to four weeks’ rent (or market rent). See section 49B(3)(b) RTA.
The confusion stems from stating that a tenant’s liability for careless damage, not covered by the landlord’s insurance, is restricted to four weeks’ rent (or market rent), as per section 49B(3)(b) RTA.
This raises uncertainty: if the landlord’s insurance rejects a claim for such damage.
Could the tenant still be liable for up to four weeks’ rent for careless damage?
Let’s take a closer look at an important decision to better understand this issue.
So what does this Tenancy Tribunal order say?
