Landlords are opposing a law change that aims to protect tenants from being financially disadvantaged if a flatmate causes damage to a rental property.
Labour MP Maryan Street has proposed the Residential Tenancies (Damage Insurance) Amendment Bill which would require landlords to insure the interests of tenants. She said most tenancies were joint tenancies at common law, so tenants were jointly liable for damage to properties they were renting.
Landlords' insurers can and do insist on recovering the cost of damage from tenants, regardless of whether they caused the damage.
Street believes tenants should be protected against personal liability for damage they were not responsible for.
'It will mean that if your flatmate falls asleep with a cigarette in their hand and the flat is damaged by a fire, you will not be liable for damages because you didn't cause the fire,' she said. 'The person who caused the damage will be liable.'
Andrew King, an executive member of the NZ Property Investors Federation, said the bill had taken the private rental sector 'completely by surprise' and there was nothing wrong with the existing law because the blame was spread.
'Should a flatmate's careless use of a cigarette cause the house to burn down, the landlord's insurance protects the landlord, but the insurance company can seek compensation for the damage from all the tenants,' King said.
'As tenants are joint and severally liable - meaning the consequences following the actions of one flatmate apply to the other flatmates - for damage to the rental property, flatmates who had no involvement in the damage may find themselves liable for the cost.'
He believes the proposed bill is an attempt to protect flatmates from the liability of other flatmates, and the federation is opposed to the changes on several fronts.
King said the sector's transient nature was one problem.
'Many group flatting situations can involve individual tenants coming and going without the landlord's knowledge. Will the bill allow remaining tenants to simply blame a departed tenant for causing damage to the property in an attempt to escape their responsibilities? If so, insurance companies could insist that the landlord not only find the departed tenant but then prove that they were the ones who caused the damage in the first place.
'Tenants could also blame visitors to the property. These potential situations would make renting to groups a high-risk undertaking and could lead to groups finding it difficult to secure rental accommodation.'
King said tenants should be paying the insurance premiums, not landlords.
'Surely if Government believes that group tenants need insurance protection and want to make this compulsory then the compulsion should be aimed at the tenants not the landlords,' said.
'The benefit of the insurance is after all directly for the tenants, not the landlord.
'Assuming that the cost of extra insurance premiums could be passed on to the tenants, the federation wonders if tenants actually want the insurance and are willing to pay for it.
'This brings up the issue of exactly what insurance premiums would cost and what they would cover.
'Would a tenant be covered already if they have contents insurance?'
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