Who’s liable if tenants cause damage?
Research report
1 June 2017

Who’s liable if tenants cause damage?

Who’s liable if a tenant carelessly, but accidentally, spills red wine on the floor or chargrills the kitchen?

Exactly who’s liable for damage to a rental property has been the subject of a long-running court case.

Last year, the Court of Appeal held tenants aren’t responsible for accidental damage if it’s already covered by the landlord’s insurance. What’s more, tenants can’t be required to pay the insurance excess on the landlord’s behalf.

The case, Holler and Rouse v Osaki, stemmed from a fire at a property owned by Mr Holler and Ms Rouse, and tenanted by the Osaki family. The fire was caused by a pot of oil left unattended on the stove and resulted in more than $216,000 worth of damage.

The landlords were insured by AMI Insurance, which paid for the repairs, but then went after the Osaki family to recoup its costs.

Central to the case was the tension between the Residential Tenancies Act and the Property Law Act. The first act stipulates tenants must ensure the property isn’t intentionally or carelessly damaged; the second prevents tenants from being held liable for accidental damage if the damage is already covered by the landlord’s insurer.

The courts found the Property Law Act provisions applied to a residential property and held the Osaki family wasn’t liable for the repair costs.

But the outcome irked property investors who lobbied for a change to the law. The government responded by introducing a bill that will change the current state of affairs and make tenants liable for the cost of their landlord’s insurance excess up to a maximum of 4 weeks’ rent for any damage caused by carelessness.

Tenants still can’t be held liable for normal wear and tear. Nor are they liable for damage caused by natural disasters.

Intentional damage is another matter. Tenants can be held liable for repairs if they (or one of their guests) intentionally damage the property or cause damage while participating in a criminal offence.

In some circumstances, tenants may have to bear some of the cost if the property needs repair but they fail to inform their landlord. If they allow the damage to deteriorate further, the landlord may be able to claim back costs. If the landlord discovers the damage at the end of the tenancy, they can make a claim on some or all of the tenant’s bond.

If the parties can’t agree, the matter can be taken to the Tenancy Tribunal for resolution.

The Residential Tenancies Amendment Bill (No 2), which will change the law and make tenants liable for careless damage, was introduced into parliament in May. The public will have the opportunity to make submissions when it’s referred to Select Committee.

Member comments

Get access to comment

Phyllis L.
25 May 2020
Property Managers and insurance

I am sick of bad property managers of well known big real estate companies! How is It they bury their heads in the sand and get away with it e.g. allowing tenants to conduct illegal activities on the property e.g. drug lab in garage and not report this then say nothing like this happened! Sick of being ripped off by bad property managers. Further sick of insurance companies dodging claims due to being told when did this happen when tenants/ property managers have never reported damage when it happens and property company put ok condition on reports when it isn’t! Make property management professional qualified and responsible profession not like it is now: too many hillbillies out there ticking boxes on property reports without being responsible because they know they can get away with it! Enough! Law needs changing quick smart to protect our biggest assets that we mortgage. landlords dont have unlimited access to money nor does it not grow on trees. Our rental property has been devalued through poor property manager recently by 20-30000! Yet they deem it quite ok on property reports! How does a front door frame get pushed out? Hit hard by tenants. How does violence e.g. holes in doors and walls go unnoticed for drug use or house not get tested for drugs when it was so obvious? E.g. blackened ceiling in garage and dark sticky liquid on ceiling in garage yet we were told on property reports all ok! So sick of this nonsense!

Jeni W.
16 Feb 2021
Poor property managers

Phyllis take them to the Disputes Tribunal for negligence. Does their management agreement say they will act professionally. Read the agreement and if they didn't act as they should of take action.

Sometimes drugs can be hard to detect.