Smith NickRESIDENTIAL TENANCIES AMENDMENT BILL (NO 2)First ReadingHon Dr NICK SMITH (Minister for Building and Construction): I move That the Residential Tenancies Amendment Bill (No 2) be now read a first time. I nominate the Local Government and Environment Committee to consider this bill. The bill addresses three issues. Firstly it implements a common-sense approach to the issue of who pays for careless damage caused by a tenant; secondly it addresses the contemporary issue of meth contamination of rental properties; and the third reform addresses an anomaly where the Tenancy Tribunal does not have jurisdiction over the renting out of non-residential properties.This bill builds on our changes to residential tenancy law made last year. In that bill we made smoke alarms compulsory from 1 July last year and I note and welcome the drop in fatalities in house fires as a consequence. Last year we also introduced a requirement for all social rental housing to be insulated by 1 July last year and for all other rentals to be insulated by 1 July 2019. This provision continues this Government's leadership on home insulation. Since 2009 we have insulated over 320000 homes. Others talk; we do. This compares to just 50000 homes that were insulated under the Helen Clark Government over the same number of years and with that sort of comparison—320000 compared with under 50000—I do find it a bit rich for the Opposition to be constantly questioning our leadership in that area.The third change we made last year was the establishment of the tenancy compliance and investigation unit to ensure that our housing regulations are enforced. There are now over 200 property cases before the Tenancy Tribunal from that unit and that reform is also proving successful. These tenancy law changes in both the first and now the second bill are just part of the Government's broader ambitious programme around housing reforms which has included the special housing areas the Crown Land Development Programme KiwiSaver HomeStart and the Resource Management Act changes which are seeing record levels of construction and improved housing standards. We need to accept that the housing challenges we face do not have a single bullet a single magic answer but actually involve a whole series of reforms.The first set of amendments addresses the consequences of the 2016 Court of Appeal decision Holler v Osaki. That decision changed the previously understood legal settings for tenant liability for damage in rental properties. As a result tenants are now largely free from the cost of careless damage they cause in rental properties and landlords are bearing most of those costs. This situation is neither fair nor appropriate. Landlords should not be paying for damage to their rental properties that they have not caused and what is more it provides the wrong incentives if tenants do not have some level of responsibility for their actions. But nor should tenants be exposed to the risk of litigation by insurance companies for hundreds of thousands of dollars for catastrophic damage caused by a careless act such as in the Osaki case. Many tenants assume that the risk for catastrophic damage caused by a careless act is covered by their landlord's insurance.This bill makes it clear who pays for what. Tenants will be liable for each incident of careless damage they cause up to a limit of the value of their landlord's insurance excess but with a cap of 4 weeks' rent. These damage liability settings 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 the double-up of insurance arrangements. It specifies that an insurer of premises against destruction or damage has no right of subrogation in relation to a tenant's liability under the bill and to ensure tenants are not out of pocket for careless damage insurance companies will not be permitted to take into account a tenant's payment to the landlord for careless damage when calculating the insurance payable to the landlord under a policy.It is important to note that the proposed settings apply to careless damage. Tenants will remain fully liable for intentional damage damage caused by an act or omission that constitutes an imprisonable offence or if the insurance money is irrecoverable because of a tenant's act of omission. Insurers will retain a right of subrogation against tenants for these categories of damage. These exceptions from the Property Law Act will be incorporated into the Residential Tenancies Act. Equally so landlords will be fully responsible if it is natural disaster risk such as a flood or earthquake and will need to take out appropriate insurance accordingly. Tenants and landlords will need to discuss insurance arrangements so that tenants understand the exact level of their liability. The bill adds this understanding by providing that a landlord must disclose relevant insurance information or that he or she does not have the insurance over the rental premises. Failure to comply with the insurance disclosure requirement will be an unlawful act with a maximum penalty of $500 for non-compliance.The second set of amendments is required to protect tenants and landlords from the harmful effects of methamphetamine contamination and to provide clarity on the level of contamination where it poses a serious risk to health. I must acknowledge the work of Andrew Bayly the MP for Hunua and Alastair Scott the MP for Wairarapa for the work they have done in this area including the development of a member's bill. Meth use and manufacture are serious ongoing issues in the rental market both in social and private rentals. Contaminated homes create real and serious risk to the health of occupants but equally we do not want homes being vacated as a consequence of an overly cautious approach to this matter. The key provisions of this bill provide clarity about the rights of entry and clarity about the rules to disclose the test results. They also enable us to be able to incorporate into the regulations the standard that we announced last week—developed by Standards New Zealand—about the appropriate level of contamination whereby properties should not be occupied and ensuring that is based on sound science.The last part of this bill makes it an unlawful act with a maximum penalty for exemplary damage of $4000 for a landlord to provide premises that the landlord knows not to be fit. There is a range of rental properties that could be unlawful for residential purposes where the building is either a garage or a commercial building or in some other way it does not comply with the relevant building health and safety regulations. The difficulty for the Tenancy Tribunal is the ruling from the High Court that the Tenancy Tribunal does not have jurisdiction in the event that it is not a residential property. So the purpose of this part of the bill is to ensure that where landlords do rent out inappropriate properties there is the capacity to be able to hold those landlords to account.I think we can all think of situations that occurred in Wellington because of the Kaikōura earthquakes—situations where commercial buildings that had been deemed earthquake-prone were rented out as residential properties. I think most in this House would find that abhorrent but it is unacceptable that the Tenancy Tribunal was prohibited from being able to have jurisdiction in that area. Equally there have been examples around the country of garages or other properties that are being rented out that do not go anywhere near meeting the requirements of the Residential Tenancies Act but where there are limitations on our new compliance teams being able to enforce them because of that jurisdiction issue. My view is that the amendments in this bill that make it plain that the tribunal has full jurisdiction over unlawful residential premises will strengthen the regulatory environment and ensure that those people who attempt to rent out such properties are held accountable.The three provisions of this bill—clarity around the issue of damages improving the management in terms of meth contamination and further enforcing our capacity to ensure that properties are of a good standard and are able to be tenanted—are just part of this Government's pretty common-sense and practical approach to the Residential Tenancies Act. As I said earlier it builds on our work of requiring smoke alarms and of requiring insulation. It will improve the safety the protection and the clarity for the rental sector and I commend the bill to the House.