Q&A: Tenant liability for careless damage

Coffee spill causes stain to carpet
Careless damage: for example, an accidental spill causing a stain Photo credit: Getty

Following hundreds of comments on Newshub Facebook posts about tenant liability for careless damage under the Residential Tenancies Amendment Act, we've got answers to some of the most frequent comments below.

Can tenants pay for careless damage out of their bond?

The Ministry of Business, Innovation and Employment (MBIE) confirmed that payment for careless damage is to be made separate to the bond, by the tenant to the landlord after the damage occurs.  

Ota Savaiinaea, operations manager at Housing and Tenancy Services confirmed that there's no change to the bond process.  Landlords can request that tenants pay a bond to cover unpaid rent, damage to the property or any claim relating to the tenancy.

"Tenants who have looked after the house and paid rent in full should get a refund of their bond when the tenancy ends.

"A bond can be up to the equivalent of four weeks' rent."

Are tenants legally required to have contents insurance?

Although tenants aren't legally required to have contents insurance, the Insurance Council of New Zealand (ICNZ) recommends that tenants have their own contents insurance.

The Act holds tenants liable for careless damage caused by themselves and their guests - this could increase the risk of a tenant being liable.

I can't afford contents insurance - are there any options?

Kay Read, Group Manager Client Service Delivery at the Ministry of Social Development said that help with budgeting is available, to enable people to plan for regular costs.

Read also confirmed that for people and families receiving a benefit, funding is available to help with urgent bills including insurance, to ensure they can maintain their policies.

"We consider every person's situation on an individual basis to understand their needs, discuss options, and offer all available support.

"If someone is having trouble meeting the cost of their contents insurance, we encourage them to get in contact with their local Work and Income office and meet with us to discuss their situation," she said.

Jason Bayly, owner of JB Insure said that there are options to reduce the cost of contents insurance.

"If affordability is an issue, [people can choose] a higher excess - that's the amount you're required to contribute when you make a claim."   

Tips for choosing a policy

Bayly confirmed that the reason for having contents insurance is twofold: for tenants to cover their own stuff and any unintentional damage to the landlord's (or other) property.

"If tenants want to protect themselves for careless damage and third party liability, they need to ensure the policy [wording includes] 'Section Two Liability'," he said.

Policy wordings can differ, and if you're in doubt on what your policy covers, Bayly recommends that you check with your provider or insurance broker.

Karen Stevens, Insurance & Financial Services Ombudsman (IFSO) spokesperson said that of the 322 complaints the IFSO received in the last year, 35 percent were about house or contents insurance. 

The most common areas were policy exclusions, confusion around what policies did (and didn't) cover and gradual damage.

"Insurance does not cover all things at all times. The best time to understand your cover is before you might need it," Stevens said.

Here are the IFSO's top insurance tips:

  • Check your policy and be clear about what it does and doesn't cover. 
  • Ask about exclusions and limitations.
  • Find out what you need to do to make a claim.
  • Tell all and tell the truth. 
  • Be sensible and take care. 

What are landlords required to provide?

From 27 August, landlords are required to include insurance details on the Residential Tenancy Agreement, including the excess amount of any relevant policies, and update the tenants if the insurance changes.

Existing tenants are able to request insurance information from their landlord.