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Recent Case Gives Tenants Protection From Liability

23 October 2014

Recent case gives tenants protection from liability

Most tenants have, no doubt, been blissfully unaware of the liability they could have faced if they had accidentally left something cooking on the stove or a tap running.  A recent case gives tenants some protection against this liability.

 

The case of the four unlucky scarfies

In 2002 the District Court in Dunedin found four flatmates liable to their landlord’s insurer for more than $67,000 for the cost of repairing fire damage to their flat. The fifth flatmate had already admitted liability. The four flatmates were liable even though the damage was not caused by them but by the fifth flatmate leaving bacon cooking on the stove while he visited a neighbour. (Under the Residential Tenancies Act, a tenant is liable to the landlord for damage caused by the tenant. Persons on the premises with the permission of the tenants are also liable to the landlord for the damage they cause.)

The judge commented that the result was unjust for the four flatmates because most flatmates would be unaware that their landlord’s insurer has the right to sue them for the loss. The judge also commented that most tenants assume that if a landlord is insured, they are not at risk. He noted that insurance premiums are factored into landlords' costs when fixing rents and they are effectively paid by the tenants. The judge called for reform of the law to avoid this unjust result.

 

Mr and Mrs Osaki more fortunate

A similar case arose recently, but with a different (and many would say just) result. The judge in this case found that Mr and Mrs Osaki were not liable to their landlord for $216,000 worth of damage. The damage was caused when Mrs Osaki left a pot of oil on the stove and it ignited causing a fire.

The fortunate result for Mr and Mrs Osaki was possible because of a change to the law in 2007. The Property Law Act 2007 prevents a landlord (and therefore the landlord’s insurer) from recovering loss caused by certain events, including fire and flood, from the tenant. The tenant will not be protected if the loss is caused by an intentional or criminal act by the tenant.

In order to reach this result the judge had to overcome a tricky hurdle. A section in the Residential Tenancies Act specifically stated that the relevant protecting sections in the Property law Act did not apply. However, the judge found that Mr & Mrs Osaki were entitled to the protection by considering the purpose of the Residential Tenancies Act and relying on a section in it allowing general principles of law to be considered.

 

The law is not always black and white

Judges sometimes achieve the result that they wish where the law is ambiguous by interpreting it in such a way that gives the desired result. Luckily for Mr and Mrs Osaki the judge was able to find in their favour. Their landlord might not have been so lucky – if they had not been insured they would be out of pocket by $216,000.

Please email me at barbara.mcdermott@nwm.co.nz with your ideas for future articles.  Keep an eye out for next month’s column, where I will discuss another relevant rural legal issue.


Barbara McDermott is a partner of Norris Ward McKinnon, specialising in commercial and rural law.  With offices in Hamilton and Huntly, we have friendly, expert legal advisors ready to help you with your business and personal legal matters.   Find out more about us at www.nwm.co.nz