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The Maryan Street Bill on Tenants Insurance

Article provided by Scotney Williams L.L.B 1

The bill is misguided in the extreme and far from curing the problem will only exacerbate it. So what is the problem? Some tenants, remarkably few in number, have been made jointly and or severally liable for significant damage done to landlord’s property.

Tenants lobby groups have complained to Maryan saying it’s just not fair to make them liable for the damage they cause or permit. Maryan clearly agrees with this and rather than compelling tenants to have insurance to protect their own chattels and public liability risk, wants to make landlords liable for arranging the tenants insurance and paying for it.

Not only is the logic of making landlords liable for arranging tenants insurance perverse when it is the tenants who are causing the damage, but it sends the wrong signal to tenants who according to Housing New Zealand are already damaging property worse than ever.

There are other objections far from the fundamental principle of making the responsible accountable.

If the policy was in joint names of the landlord and tenant (as some have suggested) any claim, damages the landlord’s record when it has nothing to do with him or her and making further insurance cover for the landlord difficult.

There is no guarantee that the landlord could even get insurance for the particular tenant, the tenant may have an abysmal record and no insurance company might offer insurance, what then? Ultimately an insurance company will have to be the Insurer of last resort (for those refused insurance ) and if that happens the Government might have to direct State Insurance to provide the insurance. Its not going to be a happy State Insurance offering insurance to bad risk clients. In turn, it might have to get a subsidy from Government to continue to offer the bad risk insurance.

Apparently the biggest worry is not the policy issue at all but the concern that if tenants had to arrange the insurance, they could get the tenancy with the insurance cover then immediately cancel it and keep the refund. Chasing the tenant is seen as too hard so making the landlord liable is so much easier since the landlord could be sued or prosecuted if for any reason they did not keep the cover current.

It has also been suggested that landlords could recover the policy premium from the rent. This is just fundamentally wrong. Rents are set by market forces and tenants are remarkably well informed about the level they want to pay. Landlords will never be able to recover the premium cost from the rent. The premium cost will just be another burden to landlords.

The answer is simple, make the tenants responsible for arranging their own Insurance cover and have the landlords name noted on the policy as an interested party similar to noting the interest of the mortgagee on a householders’ policy. The insurance policy could only be cancelled during the term of the policy with the consent of the landlord or by order of the Tenancy Tribunal.