Residential Tenancies (Damage Insurance) Amendment Bill — First Reading 
Residential Tenancies (Damage Insurance) Amendment Bill — First Reading 
[Volume:630;Page:2742] 
Residential Tenancies (Damage Insurance) Amendment Bill 
First Reading 
Debate resumed from 29 March. 
CHRIS TREMAIN (National—Napier) 
: 
 In the brief 3½ minutes that I have I would like to finish my speech about the Residential Tenancies (Damage Insurance) Amendment Bill. The aim of the bill is to protect tenants against personal liability for damage caused to a premise when they played no part in causing it. 
Just quickly before I get into that I want to look at the current relationship that exists between landlords and tenants under the Residential Tenancies Act. It is a contract at common law. There are a couple of things here that cover both the landlord’s responsibilities and the tenant’s responsibilities. The landlord’s responsibility is firstly to provide and maintain the premise in a reasonable condition. Secondly the landlord is to allow the tenant quiet enjoyment of the premises. Those are a couple of the landlord’s responsibilities. Let us look at some of the tenant’s responsibilities. They are to pay the rent on time to keep the premises reasonably clean and tidy and to notify the landlord as soon as any repairs are needed. The most important point here though is that one cannot damage or permit damage to be done to the premises one must inform the landlord of any damage and lastly one must leave the property clean and tidy and clear of rubbish and possessions at the end of the tenancy. 
In my opinion the accountability is clear there. If the tenant damages the property or if the tenant brings friends on to the property who damage the property the accountability is clear. The law sends the right message. If there is a positive relationship and the tenant damages the property he or she is responsible for fixing it and putting it right—that person is responsible as the tenant. If we look at what this legislation seeks to do we see it seeks to protect a tenant against personal liability for major damage to take away any responsibility from the tenant and to avoid the tenant coming up with payment for any damage that he or she played no part in causing. 
I will just give members a quick example of something that happened over the adjournment. I was called to a property in Hastings Street in Napier. The neighbour in fact called me to view a tenanted property. We walked up there. There were plates strewn across the road and rubbish all outside the place. The front door had been smashed in. We found out what had happened. The tenant had vacated the property and left two friends in the property with their small child. It was the friends who were responsible for the damage that had taken place in that property. The new law would protect the tenant against personal liability for any major damage that had been caused by his or her friends—a premise that is absolutely crazy. We have a situation where the damage has been caused by the act of the tenant who has brought his or her friends in and now we are looking to pass legislation that takes any responsibility for that away from the tenant. 
I personally think that is crazy. The poor landlord is now faced with proving the extent of the damage and the amount of it. The landlord has to prove who is responsible for the damage— 
Kate Wilkinson 
: He is not even there. 
CHRIS TREMAIN 
: He is not even there; it is absolutely crazy. We will now force landlords to take out tenant insurance. Whom will that be passed on to? Probably to the tenant resulting in an increase in rent. Lastly it sends absolutely the wrong message to tenants. It tells them not to worry about the property any more because if they bring their friends on to the property and the friends damage it well c’est la vie. 
I am totally against this legislation; so is the National Party. 
SUE BRADFORD (Green) 
: 
 On behalf of the Green Party I welcome the introduction of this bill to Parliament. We will be voting for it and I hope sufficient other parties will do likewise so that it can proceed to select committee for deeper consideration. I also congratulate Maryan Street on getting a useful member’s bill like this into the House so early in her parliamentary career. I hope it succeeds whether as a bill in its own right or as part of the broader revamping of the Residential Tenancies Act which I hope will happen soon. I just hope that Ms Street’s bill does not share the fate of the Residential Tenancies Amendment Bill that deals with boarding houses which sank into the mire of parliamentary process in the Social Services Committee and has never been seen again since it came out of that committee. 
The Green Party supports this bill from a fundamental belief that New Zealanders deserve secure and affordable long-term rental accommodation as a valid housing option and that both tenants and landlords deserve to be treated fairly by the State and by each other. However we ought to accept that residential tenants are on the whole an economically and socially vulnerable sector. Landlords with admitted exceptions and insurance companies tend to have considerably more economic power than tenants. 
Over the years there have been a number of cases in the tenancy tribunal that have resulted in decisions regarding damage to a landlord’s property that have been blatantly unfair to tenants. For example one of the earliest was tenancy tribunal decision No. 33/87. In that case when damage was caused by subtenants the chief tenant was found liable by the tribunal despite having no responsibility whatsoever for the damage caused. Cases of this nature culminated in a District Court appeal from the tenancy tribunal in September 2002 in which Judge MacAskill in the Dunedin District Court specifically suggested legislative change as a mechanism to address what is an obvious injustice in the law. I commend Maryan Street for taking up Judge MacAskill’s observations about the inadequacy of the law in this area and for taking the opportunity of using the member’s bill process to rectify what is a clear inequity. 
The Green Party believes that the principle behind this bill is totally fair. Insurance cover should be extended to include the interests of tenants not just those of landlords and tenants should be covered for all situations except damage that they have intentionally caused themselves. One tenant should not be required to pay compensation for damage caused by another for whom they have no responsibility as can currently occur. Landlords should be required to insure against damage caused to their property by tenants or their subtenants or visitors. 
This bill does not impose any additional costs on landlords. As I hope members will realise—and indeed I have heard some of the National Party members say this—the costs of insuring against tenant liability for damage can be passed on to the tenant by means of rent. Nothing in this bill will stop that from happening. It will not necessarily be an extra cost for the landlord. 
What this legislation proposes is an exemption from the insurance covering tenant liability when damage has been caused intentionally by a tenant. That is simply reasonable and is consistent with other legislative provisions such as the recovery of a debt incurred as a result of fraud which is treated differently in law from the recovery of a normal civil debt. 
However we do have some reservations in the area of the limitation of this provision to intentional damage. What if for example damage has been caused unintentionally but by an unlawful act such as a tenant operating a P lab that explodes in the property or through a grossly negligent act such as a drunk tenant smoking in bed and passing out and fire taking hold? Should the landlord’s insurance company bear the brunt of the cost of damage caused by such unlawful or grossly negligent acts? These are matters for the Social Services Committee to consider but I do note that we have some concerns at this stage about this particular aspect of the bill. However I am sure they can be sorted out. 
There is no question that overall the bill is sound in principle. It will work to rectify a longstanding injustice and the Green Party welcomes its introduction. I look forward to what I hope will be a substantial consideration of it by our select committee shortly. 
TARIANA TURIA (Co-Leader—Maori Party) 
: 
 What is said in the whare or in this case what is said by members of Parliament is heard by the tahuhu who hear everything that has been said everything that has gone before us and the words of those who are gathered here today. So housing matters have always been of importance to Maori whether as owners tenants insurance agents or inhabitants. 
The current housing profile for Maori is unfortunately not a very pretty picture. Despite the fact that home ownership is a strong aspiration for Maori people such a desire is frequently not translated into reality. We are three times more likely to live in rental accommodation than New Zealand Europeans. Currently 59.7 percent of Maori people live in households that pay rent compared with 21.6 percent of non-Maori. Factors such as higher levels of unemployment lower personal incomes strong urbanisation and concentration in high-cost housing markets like Auckland have all contributed to the disparities that are evident between Maori and non-Maori in the housing market. Other factors such as institutional racism may account for differences in housing allocation. 
In looking at this bill we must be guided by the high rental environment that tangata whenua inhabit. The Maori Party will support this bill going to a select committee in order to enable the large number of Maori who are renting boarding and flatting as tenants to be able to have a say. We seek every opportunity for people to participate and for their voices to be heard. 
We are however also mindful of the numbers of Maori who are involved in the housing sector as landlords investors and owners. We are aware of key housing networks such as Te Tai Tonga Housing Forum led by Rakiihia Tau and Tiopira Hape Rauna who would have considerable experience to contribute to this debate about the universal goal of achieving quality affordable housing with safe and secure homes. These people must have a say as well as the tenants. 
We understand the purpose of the bill as being to amend the Residential Tenancies Act 1986 in order to protect tenants against personal liability for major damage caused to premises that they play no part in causing. The fundamental question however must be why we should automatically assume that landlords should therefore be liable for damage caused to premises that they also have no part in causing. The Maori Party is keen to encourage further discussion on the concept of collective responsibility and ownership and by this we mean the capacity to care for one another. Putting it simply who is more likely to know about the damage caused to premises: the landlord who may not even live in the same town or the tenant in the next room? We must restore the sense of responsibility as individuals and collectives—as a whanau or a group of tenants in a single property who all sit around the same television at night who contribute to the same food kitty and who collectively pay the rent. Why could not these same people also pay to protect themselves? That is the question. Although we appreciate that nothing in the bill will prevent landlords from passing on the cost of additional premiums to tenants as part of the rent could we not see this as an educational process for tenants particularly our young people about the value of insurance and of taking responsibility for one’s property and other people’s property? 
The final issue that we seek further ideas on in the select committee is the low insurance coverage for Maori in the housing sector. If there is any doubt of this one need only look at the nature of the crisis response required after the freak damage created by the floods earthquakes and storms of the last few years such as in my electorate the Rangitikei and Manawatu floods the East Coast floods and the destruction that ravaged through the Bay of Plenty. Indeed one report in 2004 stated that an incredible 111 of the 141 homes in Whakatane that were deemed uninhabitable did not have contents insurance. 
Those are but some of the issues that we hope can be raised in the ongoing debate around this bill. The provision of quality affordable housing particularly for low-income families is a significant priority focus for the Maori Party. If this bill can do anything for these families particularly the 63000 Maori families who have been cut out of the Working for Families package then we will be eager to hear about it. We will support this bill going to select committee to ensure that Maori views are able to be heard and we look forward to that process. 
Hon DAVID PARKER (Minister of Energy) 
: 
 I thank the members for their prior contributions. I think they have all been valuable. I acknowledge Maryan Street for bringing this bill forward. I also thank a constituent of mine when I was the MP for Otago Warwick Goldsmith who is a lawyer in Queenstown and who is the source of this bill originally. He wrote to me as a constituent and as a lawyer reporting a commentary on the  
Harrison 
 v  
Shields and others and Medical Assurance Society New Zealand Ltd 
 decision whereby as a prior speaker mentioned the judge concluded in his comments that: “The outcome of this proceeding though in accordance with the law is unjust.” I think that is the essence of the issue we are dealing with today. 
Is it just when there is a joint tenancy between tenants to enforce liability on the part of one of the tenants if the place burns down? The present position is that the landlord can and generally does insure the property but when the property burns down the landlord’s insurerFR can exercise a right of subrogation and stand in the shoes of the insured and do what the landlord could do if the landlord was not insured. So the insurance company can effectively force the landlord—who might not want to do anything against the tenant and might think it is quite an unjust outcome—to sue the tenant to recover the losses that may not have been caused by that tenant. 
I think that is unfair and I contrast the position with a family that occupies their own home. The family might occupy their own home and insure it. Their mother might be living with them and it might be the mother’s negligence in leaving the towel next to the heater that causes the fire but one does not hear in that situation of the insurer exercising rights of subrogation to sue the mother or the child or the wife or the husband who caused the fire. 
 The insurance premium of course is not much different in either situation yet in the situation of the non - owner-occupied property the insurer has the opportunity to have and does exercise rights of subrogation that would not occur in an owner-occupied situation. Having said that I do acknowledge that there is something in some of the statements made by Tariana Turia and by the National Party. They suggest we need to take care that we do not cause unnecessary problems in respect of minor damage to premises where perhaps it is appropriate that all tenants share the obligation to make good damage caused by a co-tenant because they may be able to influence that damage not happening if they have some level of responsibility. I am not sure where the line should be drawn there and I think it is something that the select committee should look at. 
What I am clear on is that it is not right in the case of fire that the major risk being insured against by the landlord does not also cover the interests of the tenant. That could be achieved for so small an extra cost and the full amount of that extra cost could be passed on to the tenant. So I think this is a good bill. 
Finally I will respond to one thing Sue Bradford said. She gave the example of someone falling asleep in bed while smoking and thus causing a fire. She thought that person should perhaps be made liable but I do not think that person should be. I think the same situation should apply to that person as a tenant as would apply if that person was an owner-occupier or the mother or child of the owner-occupier if they were to do the same thing. 
I think this is a good bill and that there is a need to look at the issue of minor damage. I suggest that this bill should be limited to matters of damage caused by fire so as to avoid the large risk that could cause perhaps a $100000 liability but those are matters of detail that the select committee can report to the House. I support the bill. 
GORDON COPELAND (United Future) 
: 
 Firstly I would like to offer my congratulations to Maryan Street on having had her bill drawn from the ballot. I know from my experience in the last Parliament that it is always good to have one’s bills drawn. I had a couple drawn in the last Parliament one of which I might mention is an important constitutional bill to do with property rights. We are now just a few days away from the anniversary of the first reading of that bill and submissions have yet to be heard by the select committee so it could be a very long process. 
This bill raises a very interesting issue. I am a landlord and I insure the property that I let for my interest in it which is the replacement value of the property itself and also the value of those contents inside the property that are my property rather than the tenants’ property. Of course I expect the tenants to insure their own goods inside the house be they personal clothing furniture or whatever. I do that as a landlord because I want to protect my property in the event of it being accidentally destroyed by fire earthquake flood or whatever. 
This bill raises a new issue in respect of damage done to a property by a person who has only a peripheral if you like relationship with another joint tenant and who is not actually involved in any shape or form with the cause of the destruction of the property or its damage. For that reason I think it is good for this bill to go to a select committee and United Future will be supporting it going to a select committee. Like the Hon David Parker who has just resumed his seat we support this bill. By the way I would like to publicly congratulate David on his reinstatement to his various portfolios and I wish him well in those endeavours in the future. I have not had a chance to offer my congratulations to him personally because he was talking with the media at the time. I believe that the Hon David Parker has a lot to offer this country and this Parliament. 
United Future will support this bill going to a select committee and I hope that it will look carefully at the matters raised in relation to physical damage caused to a property. Under a normal tenant-landlord agreement that sort of damage should result in the tenant being expelled from the property. It would bring the tenancy itself to an end in any event under normal contractual arrangements and the landlord is free to pursue remedies against the tenant for that damage. This bill is about insurance. I think we need to keep those two things in mind and not mix them up—as I believe a couple of earlier speakers have done. 
With those few remarks I am happy to signal that United Future will vote to send this bill to the select committee. 
MARYAN STREET (Labour) 
: 
 In my right of reply I want to raise a couple of points particularly with regard to some of the speeches and media comments that have been made recently around this bill which have completely got the wrong end of the stick. I thank the member who has just resumed his seat for drawing attention to one of those confusions that has been presented in the public domain. 
First of all I say that this bill in no way diminishes the responsibility of tenants that exists anyway under the Residential Tenancies Act. Tenants have responsibilities. Under section 40(2)(a) of that Act they shall not “Intentionally or carelessly damage or permit any other person to damage the premises;”. Further to the point that my colleague the Hon David Parker made a moment ago I want to describe how personal responsibility as a tenant under the Residential Tenancies Act fits with the intention of this bill. 
This bill is really about insurance—as Gordon Copeland has just said—and insurance companies know their business. It goes like this: as homeowners we might pay insurance to cover damage done to our property. Landlords as I am advised by representatives of the insurance industry already pay a loading of some 30 percent on top of what ordinary homeowners who live in the houses they are insuring would pay by way of premiums. So landlords already pay a 30 percent loading on top of an ordinary homeowner’s insurance. If I burn down my house which I own and insure accordingly the insurance company does not come after me to recover costs. If however I am a tenant and I burn down the property I am renting then the insurance company through its powers of subrogation is able to come after me to recover costs. 
That is the thing that Judge MacAskill stated was patently unfair in the Dunedin case. I cite that case because it was revisited in a brief item on Television One last night. The mother of the young man interviewed in that programme who is now overseas said that he was her son and that she had contacted me when she heard that this bill was in the offing. She said that her son was a second-year university student and he did not have sufficient belongings to have a household contents insurance policy. That situation is typical of many students and of many people who are low-income earners or beneficiaries and who would have few belongings to insure. For a period of 4 years he was pursued by the insurance company through the District Court and the High Court and finally he had a debt of $67000 plus interest to pay to the insurance company. He was absent from the house at the time the damage was caused. 
This bill would simply put tenants on the same footing as homeowners. Why should insurance companies get it both ways? They get an additional loading from the landlord on premiums for properties they own and properties they rent out. If insurance companies are then to go after tenants for the recovery of costs they are getting it both ways. That is not fair. 
 The other point I need to stress is that in my consultation with insurance representatives there has been an assessment to say that were there ever to be any increases to insurance premiums as a result of this bill—and that is by no means an instance of cause and effect—then the increase is likely to be closer to $10 per annum than it is to $100 per annum. So I suggest that if insurance companies seek to increase premiums they are simply using this bill as an excuse to do so. Insurance companies should operate for tenants in the same way as they operate for other customers of their policies. 
A party vote was called for on the question  
That the Residential Tenancies (Damage Insurance) Amendment Bill be now read a first time. 
Ayes 71 
New Zealand Labour 50; New Zealand First 7; Green Party 6; Maori Party 4; United Future 3; Progressive 1. 
Noes 48 
New Zealand National 48. 
Bill read a first time. 
Bill referred to the Social Services Committee.referred to Social Services Committee