A tenant carelessly leaves a pot on the stove and causes $9,000 of fire damage. Rent is an invented $550 a week and the insurance excess is $5,000. Nothing unlawful or intentional happened. What is the most the tenant must pay?
Correct Answer
C) $2,200, which is four weeks' rent and lower than the $5,000 excess.
Section 49B(2)–(3) makes a tenant liable for careless damage only up to the lesser of the insurance excess and four weeks' rent where the premises are insured. Four weeks here is 4 × $550 = $2,200, less than the $5,000 excess. The cap does not apply to intentional damage, damage from an imprisonable offence, or pet damage (s 49B(1)).
Why This Is the Correct Answer
Under s 49B(3)(a) the cap is the lesser of the excess and four weeks' rent: $2,200.
Why the Other Options Are Wrong
Option A: $5,000, which is the full amount of the landlord's insurance excess.
Liability is capped at the lesser of the excess and four weeks' rent, here $2,200.
Option B: $9,000, because the tenant caused the damage through carelessness.
Section 49B(3) caps careless damage liability; the insurer covers the rest.
Option D: Nothing, because insured landlords must claim all damage through insurance.
The tenant still owes up to the s 49B(3) cap for careless damage.
Background Knowledge for Property Management
Source: https://www.legislation.govt.nz/act/public/1986/0120/latest/whole.html
Exam Tip for Property Management
Careless damage cap: the lesser of the excess and four weeks' rent.
Common Mistakes to Avoid on Property Management Questions
- •Assuming the tenant always pays the full insurance excess.
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- → Which of the following is NOT a mandatory requirement for tenancy agreements under the Residential Tenancies Act?
- → How much notice must a landlord give a tenant before conducting a routine property inspection?
- → A tenant has given 21 days' notice to terminate a periodic tenancy but wants to leave 5 days early. What must happen for this to be legally acceptable?
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- → How often may a landlord carry out routine inspections during a tenancy?
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