Tenancy law will increase premiums
15 Dec 2017
The Insurance Council told MPs today a new tenancy law would drive up premiums - and rents.
The amendment to the Residential Tenancies Act was proposed by the previous Government and is now in Select Committee, with new Housing Minister Phil Twyford unsure whether it should precede.
The amendment bill was put forward as reaction to a contentious 2016 Court of Appeal decision that removed financial liability from tenants for causing accidental damage to a property.
This meant the insurance companies of landlords could no longer seek money from tenants who had damaged properties, unless that damage was wilful, would breach the insurance policy, or was achieved in the process of breaking the law.
The amendment puts some liability back on tenants, but caps it at either four weeks rent or the insurance excess of their landlord, whichever is lower.
"This bill doesn't bring us back to the status quo," Insurance Council head Tim Grafton told the Social Services Select Committee..
"We believe it will increase protection for tenants who engage in reckless and grossly negligible behaviour...There is no real incentive for a tenant to look after a property."
Grafton argued the line between "intentional" and "careless" damage was not black and white enough to be meaningfully used.
"As an example: allowing cats to urinate on carpet repeatedly, or fixing a motorcycle in the lounge, these would be classed as careless acts."
He said insurance companies - no longer able to pursue tenants for this type of damage - would raise premiums for landlords and thus landlords would raise rents.
"It means good tenants that take good care of their property have to pay for the bad tenants."
Grafton could not produce any hard and fast figures on how much premiums might rise or recommend an appropriate cap when MPs asked.
"You can put a finger in the air and say [the cap] maybe be $100,000, it may be $200,000."
Twyford said he would see what the Select Committee came up with before deciding to support the bill further.
Labour had voted with the prior Government at the first reading.
"We thought that the issues around insurance and liabilities for tenants and landlords were worth looking at," Twyford said.
Twyford said the Insurance Council's views on the cap was "advice worth considering".
"On the face of it on first reading I thought [the cap] was a decent stab at the problem but I'm aware there are different views."
"What we want to do is have a policy that incentivises people towards good behaviour but we don't want to see an excessive burden on either tenants or landlords."