Nick Smith's Bill, clearing haze around meth contamination, landlord liability and dodgy housing, passes First Reading

Your rental property burns down due to the tenant carelessly leaving a pot of oil boiling on the stove unattended. Who’s liable?

You suspect the tenant of your rental is a P smoker. How quickly can you get in to test the property for meth contamination? How much meth needs to be present for it to be considered contaminated? Can you evict the tenant if the house fails the test?

You move into a new rental property and find out it’s contaminated. Do you have to keep paying rent? How quickly can you terminate your tenancy agreement?

You suspect your neighbour is renting out their draughty garage to a family in need of a home. Is this legal?

These are the issues the Residential Tenancies Amendment Bill (No. 2), which has just passed its First Reading in Parliament, seeks to address.

Tenant’s liability for damaging a property capped

To answer the first question, the Bill deems the landlord liable, but stipulates the tenant will need to pay the excess on the landlord’s insurance.

While most landlord policy excesses are around $400, the tenant’s liability will be capped at four weeks’ rent for each incident of damage caused by carelessness.

The Bill’s Regulatory Impact Statement (RIS) says for 25% of renters nationwide, payment will be capped at more than $1,996, for 50% of renters: between $1,116 and $1,996, and for 25% of renters: less than $1,116.

Tenants will remain fully liable if they damage a property deliberately or through a criminal act. Meanwhile landlords will remain liable for fair wear and tear and damage beyond the control of the tenants, like a natural disaster.

Insurance companies will also be prevented from using their right of subrogation to pursue tenants for causing damage.

Building and Construction Minister Nick Smith has addressed this issue of liability, as a 2016 Court of Appeal decision in the Holler vs Osaki case put the onus on landlords to pay for damage caused by a tenant’s carelessness or negligence.

The ruling was seen as a game-changer for insurers and was met with much opposition from landlords.

Smith says the settings under the Bill “strike a balance between incentivising tenants to take reasonable care of the premises they rent, and protecting tenants from very high cost and risk.

“The Bill also encourages cost efficient insurance arrangements, which will reduce disputes, litigation and the potential for double up of insurance arrangements.”

However the RIS says: “An unintended consequence could be that insurers increase premiums for landlords which are passed on to tenants in the form of rent increases (anticipating more claims from landlords in general).”

The Insurance Council of New Zealand (ICNZ) has warned this could be the case, the RIS explaining: “ICNZ prefers an unlimited cap on liability because it considers that without an effective incentive on tenants to take care of their landlord’s property, the incidence and cost of tenant damage is likely to rise over time.”

Furthermore, the RIS points out: “Landlords could increase insurance excesses to the level of four weeks’ rent to limit their risk, but not pass on savings to tenant in terms of rent reductions.

“This is mitigated by the need for landlords to disclose their insurance arrangements to the tenant at the beginning of the tenancy and during the tenancy if there were changes to the policy.”

Tenancy termination due to meth made easier

To address the second set of questions around meth, posed above, the Bill provides for a property owner to be fined up to $4,000 for renting out a home contaminated by meth.

Standards New Zealand last week detailed how much meth needs to be present in a property for it to be deemed contaminated.

The Bill also gives landlords the right to provide tenants between 48 hours and 14 days’ notice before doing a meth test, with the Standard detailing how tests should be done.

The Bill stipulates that both tenants and landlords can terminate the tenancy if the house is found to be contaminated. The minimum period of notice a landlord needs to give is seven days, while the minimum notice a tenant must give is two days.

The tenant does not have to pay rent if the property is found to be contaminated and they didn't contaminate it.

Smith says: “Contaminated homes create real and serious risks to the health of occupants, but equally we do not want homes to be vacated as a consequence of an overly cautious approach.”

Green opposition

The Greens - the only party not to vote in favour of the Bill - don’t believe Smith has struck the right balance.

Green Party MP Marama Davidson says: “We have to weigh up the harm we do when we evict people. Evicting people is a big call.”

Furthermore, she says: “The advice from the Drug Foundation is that representatives of the meth testing industry are over-represented on the panel developing the Standard…

“There is no science for setting a contamination level for meth use.”

Labour MP Phil Twyford supports the Bill, but points out: “Without proper regulation of the meth-testing and remediation agencies, these provisions are very unlikely to be effective.”

The Bill’s RIS says: “According to a recent New Zealand Health Survey, amphetamine use since 2011/12 has been constant, at around 1% of adults (which equates to 26,000 people).

“Making a crude assumption that there is no more than one amphetamine user per household, and based on 33% rental occupation, this equates to methamphetamine usage in about 8,500 rental properties and 17,500 owner-occupied properties…

“There has been a significant increase in Tenancy Tribunal decisions involving methamphetamine contamination.

“In 2015, five cases involving methamphetamine contamination were brought to the Tenancy Tribunal. In comparison, in the period January-October 2016, 110 cases were brought to the Tribunal. Half (55) of these cases involved Housing New Zealand.

“The historical and projected cost to the rental property industry and social housing providers is not known, however Housing New Zealand spent $6m in the seven months to January 2016 testing for methamphetamine and cleaning when traces have been found. Annualised, this is over $10m per year, up from $700,000 in 2013.

“In the absence of a standard, it is not clear whether the actions of Housing New Zealand have been proportionate to the actual risk.”

Prosecuting a landlord for renting out substandard accommodation made easier

To answer the final question posed at the start of the article, the Bill strengthens the law for prosecuting landlords who tenant unsuitable properties.

“The Tenancy Tribunal’s jurisdiction is currently limited to residential buildings, meaning those who rent out unlawfully converted garages, warehouses or industrial buildings as living spaces can avoid accountability,” Smith explains.

The RIS says: “It is not possible to quantify how many tenants may be living in residential premises which could be considered unlawful but the number is likely to be high because of the number of situations to which the decision could apply, including illegally converted garages, unconsented dwellings and commercial properties.

“The issue could be more prevalent in Auckland where pressure for rental housing is higher than in other areas.”

Labour’s Twyford says: “We applaud the intent of this, but it is ironic a government that has overseen an explosion in the number of New Zealanders living in substandard and over-crowded housing… is cracking down on this particular aspect of it…

“There are so many things that need to be done to improve the quality of rental accommodation, to give renters more security of tenure, to curb the property speculation that’s driving house prices and rents through the roof, but this government prefers to focus on fairly small and relatively inconsequential matters when it brings a Bill like this to the house.”

The Residential Tenancies Amendment Bill (No.2) has been referred to the Local Government and Environment Committee for consideration where the public will be invited to make submissions.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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18 Comments

Rediculous . Messing around with this distracting rubbish when we have real issues around certainty of tenure for renters. Having owned my own home for most of my life I have real sympathy for renters trying to raise a family in a stable environment, with an absence of certainty of schooling for their kids and the like. If National is going to continue their tax and welfare bias towards landlords, the least they can do is give renters some decent long term rights.

yes missed the boat on that one, they could have put provisions in for leasing and rights of renew

I'm confused, Nick Smith is normally completely incompetent. This bill actually sounds like it might be a step in the right direction. Perhaps national has realized they have completely alienated renters, and that renters as a population are growing.

it is but one step and when the government changes bigger steps will come.
now we have consigned a generation to be renters their voting block will slowly hold more power than investors so the pendulum will swing in their favour.
as for OO we will side with those we think need the help, friends and family

Don't be confused - it's in plain sight.
"Prosecuting a landlord for renting out substandard accommodation made easier"

So, a landlord will now not be able to turn a blind eye to the number of inhabitants in their rentals. Neither will they be able to rent out garages, etc..
All that means is a boom in the amount of rental property that is going to be demanded.
Don't be fooled - It's not a policy of protecting renters, it's another policy designed to enrich landlords. So, they'll get the double whammy of increased rents from accommodation supplement increase and excess demand.

Might be time to invest in rental property, me thinks.

Enriching landlords and protecting tenants need not be mutually exclusive.

I'm sorry, your point is?
Or is this just another one of those ZS arbitrary comments, stating the obvious but not really adding anything constructive?

And the question of higher moral consideration - why do we need to enrich darklords?

Enriching people is always a good thing, especially in a win-win situation. This is like a fundamental aspect of our civilization.

Why should YOU be enriched Zac? A strong sense of entitlement you have there boyo/girlo! Why not take from the landlord and give to the tenant? After all, you as the landlord have NOT had to work at all, you just bludge other folks hard earned money.

I take it you don't expect to be paid for the work you do, or the goods or services you provide? After all, why should YOU be enriched blue meanie? Why not take from you and give to someone else?

Of course the landlord has done something to deserve payment for. He has provided, at his own expense, accommodation for someone else to live in. Most people would decline to work, or provide goods and services to others, if they did not think they would be paid enough to justify their outlay. There's no reason to expect landlords to be any different.

You may think the world can survive on people providing goods and services for each other purely out of charity; let us know how you get on with that.

Actually MSD, the government does take from me, gives it via WFF(which I don't qualify for- earn too much) to Landlords. Never actually said I should. Was just pointing out the absurdity of self entitlement. But while I'm thinking about it, why shouldn't I get from the landlord? I work hard, actually pay 33% in tax. Landlords pay nothing and as Zac said, he/she got $50k in tax rebate from the IRD because of negative gearing... that on top of 100% capital gains over the last five years... system benefits landlords, why shouldn't benefit tenants?

You wrote, "Don't be fooled - It's not a policy of protecting renters, it's another policy designed to enrich landlords."
I say, no you're wrong, it could be both.Win-win, greed is good. Your statement is just plain wrong.

You're welcome to your opinion that I'm plain wrong, for sure.
I'll let the interest.co.nz commentators judge whether what you say is valid. Going on past experience, there aren't many that entertain your unique perspectives.
We'll see today, though. Today might be your day, ZS.

I just think your statement is just too binary. All issues are more complex than they first appear which is why we tend to let nature or the market take its course. Sometimes things seem contradictory. Although I am surprised that you reacted to my comment so badly as half the comment agrees with you that it could be designed to enrich landlords.
It's a bit like how I come across as contradictory by advocating the Alt-Right while also advocating Globalism. Yet it is not necessarily exclusive believe it or not. Sometime one has to be pragmatic. This is something I would like to expand upon but have commented too much already.

* Also you say that I state the obvious yet my perspective is unique. So complex!

I think your comment was fine. This Bill protects the tenant from living in unsuitable properties. To say that the main intent of the Bill is to benefit landlords is cynical. At best you could say it is both (like ZS said).
But while it may mean having to build more rentals, this indeed benefits developers, but not so much the current bad landlords who rent out their garages. These ones will lose their tenants.

I agree that you could be cynical that the Bill doesn't go further regarding certainty of tenure for tenants, and any other measures you might want, but taken at face value this Bill is actually reasonable and makes sense.

To be pedantic, does the article actually say they are cracking down on landlords tenanting garages? It says that the current law is limited to residential buildings, so excludes garages etc. I assume from that that the new Bill includes garages etc under a generic term of unsuitable properties.

All this tells me is the standard of renters is decreasing. Renting out a house to probable drop kicks was one of the main reasons I sold it and just put the money in the bank on a term deposit. Same return as rent when I did the math without any breaks in the continuity of payment and zero worries about renters wrecking the place.

Last year an Auckland land lord was ordered to pay back all of the two years rent that a family had paid to live in a garage.
The case was taken to court by the council after finding out about it due to a news story in the media. The family weren't complaining about the landlord, They were complaining about the lack of housing and their limited options.
The landlord lost 2 years rent and the family lost their home such that it was.
Many people want cheap options to help them save a deposit so that they can get on the property ladder.

As a young man I rented a garage that had no insulation at all. On a frosty Mangere morning it was colder inside than out. But that was my choice as I considered I had other priorities for my money and you are only cold if you don't where enough clothes.
I challenge the logic of not being allowed to rent a garage from a potential landlord when it is ok to live in a car or under a bridge. Give me a garage any day.