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August 2016 Newsletter

August 20, 2016Tauranga Rentals

Tenant Gets Away With Burning House Down

A landmark Court of Appeal ruling means landlords are now unable to recover the cost of any damage accidentally caused by tenants

AMI Insurance had been attempting to recover a $216,413.28 repair bill since March 2009, after a house it had insured was gutted by fire when a pot of oil was left unattended on high heat.  Initially AMI applied to the High Court, but the tenants Kenji & Tieko Osaki argued successfully that the case should be heard by the Tenancy Tribunal.

When the Tenancy Tribunal ruled for AMI, the case went back to the District Court which reversed the decision, saying that the Property Law Act 2007 applied in this case and that the Osaki’s were not liable.  Consequently, the High Court (in August 2014), and the Court of Appeal upheld this finding.

Under the Property Law Act, commercial tenants have immunity if there is inadvertent damage, and in this case the court ruled that this immunity applied to residential tenants as well.

The decision leans toward a “consumer protection” angle, in that:

  • The court’s approach was to evaluate the “source of money” used to pay the premiums, reasoning that the insurance premiums form part of the market rent.
  • The court also noted the imbalance of negotiation between an ordinary tenant (without a solicitor to advise) and a commercial lease where both parties will have legal advice.

Does this create a precedent? 

It may do, but it is difficult to say without knowing if the judgment will be appealed or seeing any more similar cases before the courts.

How will this impact the cover I have for my property?

The decision means that the excesses and any underinsurance will not be recoverable from the tenant, so it’s a good reminder to check that your sum insured is sufficient for your properties.

You will require more information on the tenants before providing cover and have a more robust tenant vetting process.

Will be there be an appeal?

The Real Estate Institute of New Zealand plan on appealing this ruling on behalf of all Landlords in New Zealand as if this case is used as a precedent it will mean the onus of proof will fall on all Owners to prove whether a Tenant intentionally caused damage or if it was accidentally caused.Please contact Dan for the full Court of Appeal Ruling

 

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