The latest news for New Zealand Landlords and Tenants
The Holler and Rouse v Osaki case concerns tenant liability and began when Teiko Osaki left a pot of oil on high heat unattended. The pot caught fire, causing extensive damage to the Holler household which the Osaki family were renting at the time.
After many different hearings and appeals, the Osaki case came to the relatively controversial conclusion that tenants would only be responsible for the cost of damage if it was the result of deliberate or criminal behaviour. If the damage was caused because of carelessness, then tenants were not liable for this cost.
This ruling received conflicted responses as sections in the Residential Tenancies Act 1986 collided with sections in the Property Law Act 2007. Although the RTA says that tenants are liable for intentional and/or careless damage, the PLA says that the landlord cannot expect tenants to cover damage that is carelessly caused and that is insured. While most landlords would assume that tenants are liable for careless and/or intentional damage under the RTA and that their bonds are intended to cover for this, the PLA opposes this belief.
After a long-awaited decision, the Court of Appeal pronounced that the application of the PLA sections to the RTA show liability is to the landlord in the Osaki case. Why? Because the situation was deemed careless and Holler and Rouse’s home was insured with AMI.
What does this ruling mean for tenants and landlords now?
This ruling has set a new precedent for cases relating to tenant liability, with landlords now needing to prove that the damage caused is intentional in order for tenant’s to cover the cost of repairs. However, intent – or lack thereof – can be difficult to prove and therefore the Osaki case ruling has left many landlords and their insurers feeling hopeless and annoyed.
Although it might seem unfair that landlords cannot expect tenants to cover damage from careless behaviour or pay the excess for this, it is worth noting that most tenants are not homeowners and do not have access to the capital or assets that their landlord might. Therefore, tenants might not have access to resources to cover the costs that landlords are faced with.
Landlords also have to accept that, as a landlord, they are faced with all sorts of tenants. Tenants who will treat their properties with varying levels of respect. When they rent their property out there is a level of risk associated with that. If the landlord isn’t prepared to deal with that, then they probably shouldn’t be renting their properties out to complete strangers.
To read more about the Holler and Rouse v Osaki case, click here.
How to combat liability
Being a landlord can be a risky business and you have to accept that liability is a reality when it comes to situations like the Osaki case. However, there are things you can do to reduce the risks when selecting tenants. Two of these things are:
- checking references, and
- background and credit checking tenants.
By properly screening prospective tenants as well as asking all of the right questions when checking references, you can minimise the risks in your tenant selection. Remember, these things might take time and cost money but they’re worth as much as your investment and in most cases are even required under insurance. For more information on where you can credit check your tenants and what you should ask when checking references, see: