Apartment rental insurance question

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Forums › Finance and wealth management › Apartment rental insurance question

surfisup1000

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#302363 17-Nov-2022 19:48

Son is at Uni and flatting in a multi-unit apartment building.

His landlord has insured their apartment ... but have discovered that if the tenants accidentally cause a fire or flood that destroys or damages other apartments then they would be personally liable to cover the cost of repairing the other apartments (even if they are insured by their respective owners).

This means, they need high value liability insurance to cover worst case scenarios (the main reason for having insurance).

I spoke to an insurance company and they said each tenant needs to take out individual contents insurance. But contents insurance generally only offers liability cover for up to 1 or 2 million dollars. Costs could potentially be 10 million dollars or more for large apartment buildings.

So I was wondering what renters do for liability cover in these large buildings?

I might have to ring round some more insurance companies tomorrow.

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#2997649 18-Nov-2022 02:16

Apartment buildings are generally mandated to have smoke stop doors. All apartment doors (as well as doors to access stairs between floors) should have a fire and/or smoke rating, and there should be fire rated walls between apartments. So in all but the most extreme cases a fire cannot spread from one apartment to another - at least not before the fire service gets there. Of course that does open you up to the potential for water damage...

As long as the landlord has provided working smoke alarms (as per the Tenancy Act requirements), then the risk of causing a total loss to the building is relatively low I would have thought, meaning the standard liability of 1-2 million should be sufficient.

That's just my 2 cents - I lived in many an apartment building in Wellington in my student days (and a few years afterwards) with no insurance at all.

eracode

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#2997651 18-Nov-2022 05:01

Wheelbarrow01:

I lived in many an apartment building in Wellington in my student days (and a few years afterwards) with no insurance at all.

Not sure that’s helpful or good advice - maybe you were just lucky. Most of us can say that in respect of some types of insurance - we have had home insurance for nearly 50 years and have never claimed - but that doesn’t mean we don’t need it.

Sometimes I just sit and think. Other times I just sit.

Handle9

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#2997652 18-Nov-2022 05:08

If it went beyond the liability of insurance cover the tenants would go bankrupt. Generally the owners insurance company isn’t going to pursue an unrecoverable debt as there would be no point.

It’s be a pain in the behind if they did pursue it but this is exactly what bankruptcy it for.

Bung

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#2997701 18-Nov-2022 05:52

IANAL : Wasn't there a recent law change limiting tenant liability for damage? The idea that a student would be liable for the whole building seems extreme. People stay in hotels and work in buildings worth millions without obvious threat of personal liability.

Apart from that don't do anything that needs a match to get started.

k1w1k1d

1523 posts

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#2997720 18-Nov-2022 08:09

Law changed in 2019. Check with Tenancy Services.

I believe liability is limited to the lower of four weeks rent or owner's excess?

Most insurance companies, and banks, offer a special renter's insurance package.

Wheelbarrow01

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#2997734 18-Nov-2022 08:41

eracode:

Wheelbarrow01:

I lived in many an apartment building in Wellington in my student days (and a few years afterwards) with no insurance at all.

Not sure that’s helpful or good advice - maybe you were just lucky. Most of us can say that in respect of some types of insurance - we have had home insurance for nearly 50 years and have never claimed - but that doesn’t mean we don’t need it.

Sorry I certainly wasn't positioning it as advice at all. Just a statement of my own personal circumstance as a student, which I think you will find is fairly common (or at least was back in the late 90's - maybe things are different now).

blackjack17

1705 posts

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#2997751 18-Nov-2022 09:12

surfisup1000:

Son is at Uni and flatting in a multi-unit apartment building.

His landlord has insured their apartment ... but have discovered that if the tenants accidentally cause a fire or flood that destroys or damages other apartments then they would be personally liable to cover the cost of repairing the other apartments (even if they are insured by their respective owners).

This means, they need high value liability insurance to cover worst case scenarios (the main reason for having insurance).

I spoke to an insurance company and they said each tenant needs to take out individual contents insurance. But contents insurance generally only offers liability cover for up to 1 or 2 million dollars. Costs could potentially be 10 million dollars or more for large apartment buildings.

So I was wondering what renters do for liability cover in these large buildings?

I might have to ring round some more insurance companies tomorrow.

this is no longer true.

4 weeks or landlords excess. Whichever is lower.

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surfisup1000

5288 posts

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#2997803 18-Nov-2022 09:30

blackjack17:

this is no longer true.

4 weeks or landlords excess. Whichever is lower.

Thanks, I've looked at this.... but, this 2019 protection only seems to apply to damage done to the tenant's own apartment. The tenants are liable for 100% of the cost of damage that spreads to other units/apartments.

rb99

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#2997807 18-Nov-2022 09:40

Call me Mr Cynical, but isn't this a standard insurance company lets see what we can get away with thing. I mean, why would anyone pay to insure someone else's property.

“The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.” -John Kenneth Galbraith

rb99

surfisup1000

5288 posts

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#2997811 18-Nov-2022 09:53

k1w1k1d:

Law changed in 2019. Check with Tenancy Services.

I believe liability is limited to the lower of four weeks rent or owner's excess?

Most insurance companies, and banks, offer a special renter's insurance package.

The 2019 law change doesn't seem to apply to other units in multi-unit dwellings.

Liability insurance always seems to be tacked on with contents insurance ... likely we'll get this, but , it doesn't really seem targeted for worst case scenarios.

surfisup1000

5288 posts

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#2997814 18-Nov-2022 09:57

rb99:

Call me Mr Cynical, but isn't this a standard insurance company lets see what we can get away with thing. I mean, why would anyone pay to insure someone else's property.

I think the tenancy laws are out of date. The 2019 law change was an attempt to clarify liability for the benefit of landlords and tenants. But, it only addressed the situation of single unit dwellings and not multi-unit situations. The law should have been extended to include damage that spreads to other apartments, then insurance policies could have been reworded and designed so noone needs to go bankrupt!

wellygary

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#2997821 18-Nov-2022 09:58

surfisup1000:

Thanks, I've looked at this.... but, this 2019 protection only seems to apply to damage done to the tenant's own apartment. The tenants are liable for 100% of the cost of damage that spreads to other units/apartments.

That's not how its written in the legislation,

its a general exemption from all liability, unless it fits the required conditions (wilful or less than 4 weeks, or landlords excess)

I don't know of anyone (renter or tenant) who has cover for 10s of million because they live in a huge apartment block they might accidentally burn to the ground...

https://www.legislation.govt.nz/act/public/2019/0037/latest/whole.html#DLM7247533

Responsibility for damage

49AGeneral principle
(1)Except as provided in section 49B, a tenant has no liability or obligation, and must not be required, to—
(a)meet the cost of making good any destruction of, or damage to, the premises; or
(b)indemnify the landlord against the cost of making good the destruction or damage; or
(c) pay damages related to the destruction or damage; or
(d) carry out any works to make good the destruction or damage.

(2) A tenant is not, in any case, liable for fair wear and tear.

surfisup1000

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#2997824 18-Nov-2022 10:14

wellygary:

https://www.legislation.govt.nz/act/public/2019/0037/latest/whole.html#DLM7247533 Responsibility for damage 49AGeneral principle
(1)Except as provided in section 49B, a tenant has no liability or obligation, and must not be required, to—
(a)meet the cost of making good any destruction of, or damage to, the premises; or
(b)indemnify the landlord against the cost of making good the destruction or damage; or
(c) pay damages related to the destruction or damage; or
(d) carry out any works to make good the destruction or damage.

(2) A tenant is not, in any case, liable for fair wear and tear.

Yes, but, this says 'a TENANT has no liability'. The tenant of one unit is not the tenant of the adjoining units . The legislation says nothing about damage to 'neighbouring' units or common areas.

Surely I must be wrong here? As you say, not many renters would be covered otherwise. But, these issues do seem to come up over the years when someone is driven bankrupt by flaws in the law.

wellygary

8325 posts

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#2997836 18-Nov-2022 10:47

surfisup1000:

Yes, but, this says 'a TENANT has no liability'. The tenant of one unit is not the tenant of the adjoining units . The legislation says nothing about damage to 'neighbouring' units or common areas.

Surely I must be wrong here? As you say, not many renters would be covered otherwise. But, these issues do seem to come up over the years when someone is driven bankrupt by flaws in the law.

I know what you are saying, but the tenancy tribunal seems to treat other apartments as part of the tenancy property in this 2020 case...

The following link is about a case where a landlord attempted to get reparations from a tenant after a flooded bathroom went through the floor and damages the below unit,

"The landlord had applied for recovery of rent arrears, failure to pay water charges, compensation for damage caused to the premises and the adjoining premises, and recovery of the application fee. "

"Evidence as to the cause of the flood is essential to the applicant’s claim. A landlord must prove that damage to the premises occurred during the tenancy and is more than fair wear and tear. If this is established, to avoid liability, the tenant must prove they did not carelessly or intentionally cause or permit the damage. Tenants are liable for the actions of people at the premises with their permission. See sections 40(2)(a), 41 and 49B of the Residential Tenancies Act 1986 (the Act)."

"Tribunal finds that the applicant failed to prove that the flood was caused by any careless or intentional act of, or any
breach of the Act by, the tenants. Accordingly, no order can be made against the tenants and the application must be dismissed."

https://forms.justice.govt.nz/search/Documents/TTV2/PDF/6274152-Tribunal_Order.pdf

invisibleman18

1362 posts

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#2997845 18-Nov-2022 11:03

Wheelbarrow01:

Sorry I certainly wasn't positioning it as advice at all. Just a statement of my own personal circumstance as a student, which I think you will find is fairly common (or at least was back in the late 90's - maybe things are different now).

It's likely still the case. Going a bit off topic, but although I lived at home as a student (Auckland), I got my first job in Wellington and flatted for a few years (2009-2012) before I got fed up of living with groups of people and moved to renting a place myself (also triggered by my parents retiring and selling up in Auckland and giving me all their old furniture, appliances etc so I didn't need to buy everything to set a place up). In flatting days I always had contents insurance (across a year it wasn't a huge expense through AA) which also covered possible damage to the house caused me, and made sure to close windows and lock doors etc when I was out. From my experience most people living in those situations didn't have it because "I haven't got anything" was the belief with maybe the major appliances in the house not being their own. A colleague in my first job found out he did actually have a lot of stuff when he got burgled without contents insurance and lost games consoles, all the games, monitor, TV, computer, sports equipment, camping equipment etc.

As a result, attitudes to security were often pretty slack. I would regularly come home to find windows at street level open, front doors unlocked etc with noone home. At two different places I even came home to the front door wide open a couple of times so the last person to leave didn't even bother to close it let alone lock it. Although I always made sure to secure the place, thankfully I never had to find out what my insurance might have said if I got burgled after a flatmate left the place open.

Anyway, on topic it's definitely sensible to get contents insurance even when flatting/renting as although the house (and maybe the fridge and washing machine, which typically wouldn't be carried out in a burglary anyway) may not be yours, over time it's not hard to acquire enough stuff that would be a lot of money to have to replace in one hit.

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