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Osaki Ruling – Landlords need to know

The Court ruling of April 2016 has been called the worst thing that has happened for Landlord rights. This Court of Appeal in favour for the tenant has set a precedent and SHOCKWAVES around the industry!

This is an involved legal challenge and I wouldn’t attempt to try and explain the complexities but suffice to say the tenants (Osaki’s) left a pot on the stove which caught fire with subsequent serious fire damage to the house.    This went through Tenancy Tribunal – appealed all the way to the Court of Appeal.  The Landlord was represented by their insurance company AMI.

The Court of Appeal decided that the Property Law Act of 2007  (PLA) applied to residential tenancies.  What this means is the if the Landlord has insurance covering the particular damage they MUST claim on their policy.  However the Landlord is not allowed to chase the tenant for the excess on their policy.

Further to complicate this matter is that tenancy expert Brian Kerr at a New Zealand Properties Investors Form last year stated that insurance companies were with their rights to decline paying out on a policy where the tenant has caused accidental damage – NO matter how severe or careless.  He says this describes a low point for Landlords. Mr Kerr said he doesn’t think the Court of Appeal realised what they had let out of the bag!  (refer to Property Investor magazine April 2017 pg 30)

There some options to endeavour to mitigate or combat the situation. None of them are ideal though.

Then there is the Foxton case with the dogs.    Dogs were explicitly prohibited in the tenancy agreement however the tenants obtained two dogs which they subsequently let into the house and caused significant to the carpet by continually peeing on it.

The adjudicator accepted the damage was caused by dogs – and found the tenant had breached their agreement, but also that the landlord hadn’t established the damage was intentional. The adjudicator did not require the tenant to pay for the cost of replacing the carpet or loss of rental costs.

The owner then appealed the decision to the District Court on the basis that the Tribunal had mistakenly applied the law. In February of this year the Court ruled in the Landlord favour – stating that once the tenant let the dogs in and was aware they had urinated on the carpet – that to continuing to let the dogs in and urinating therefore was ‘intentional’.

There may be ‘hope’ for Landlords down the line.  The Minister Nick Smith said he was considering a review of the Residential Tenancies Act – so that tenants would be liable for damage caused by carelessness or negligence.   In intentional or deliberate damage or criminal activities the tenant would be liable with no limitation.

Progress across the industry has been slow and a MBIE spokesperson says there is nothing to report as yet in regards to changes. It is likely to be next year before anything happens.

Seek n Find suggest all Landlords talk in depth to their insurance and seek the best policy available.

Also Seek n Find suggest Landlords contact REAL INSURANCE  0800 00 35 45 and check with them.  From our observation they ‘appear’ to have very good Landlord Insurance and also building insurance (if taken in conjunction with a Landlord policy).  Check REAL against your own Insurance Company.

The game has changed with the Osaki case.

A thought for the day – ‘ no person on their death bed wished they had spent more time in the office’.