The Residential Tenancies (Damage Insurance) Amendment Bill had its first reading in Parliament last week.

The federation says it is disappointed that landlord groups were not consulted in the bill’s development.

Also it is “dismayed” that there are now three legislative initiatives before Parliament that involve amendments to the Residential Tenancies Act. As an example, should a flatmate’s careless use of a cigarette cause the house to burn down, the landlords insurance protects the landlord, but the Insurance company can seek compensation for the damage from all the tenants.

As tenants are joint and severally liable (meaning the consequences following the actions of one flatmate apply to the other flatmates) for damage to the rental property, flatmates who had no involvement in the damage may find themselves liable for the cost.

If passed, the bill would make it compulsory for landlords to provide this insurance for their tenants.

The federation says if the bill is passed it could stimulate further legislation making it compulsory for landlords to insure their tenants against rental defaults.

The main argument against the bill is that it protects tenants, so landlords should not be involved at all.

“If government wants tenants to have insurance, they could make it compulsory for them to have at least third party cover to protect their flatmates against their own poor behaviour. This insurance would then follow them around which could see an increase in personal responsibility as tenants who couldn’t get insurance could get accommodation.”

The federation is also concerned that the bill would see vacating tenants making a claim leading to higher premiums for the next set of tenants.

This would occur through loss of any no-claims bonus and could see new tenants being disadvantaged through the actions of past tenants.