Tenant Damage and Your Insurance: How the Four-Week Cap Works

Tenant damage is where the law is more specific than most landlords realise, and where the number people quote is usually wrong. This is how it actually works.

The cap

The rule is section 49B of the Residential Tenancies Act 1986, and it turns on whether the property is insured.

If the property IS insured against that destruction or damage, a careless tenant's liability is limited to the lesser of the applicable excess and four weeks rent.

If it is not insured, the limit is four weeks rent, with no excess in the comparison.

There is a sting in that. If insurance money that would otherwise have been payable becomes irrecoverable because of something the tenant did or failed to do, the property is treated as uninsured for this purpose, and the four-week limit applies instead.

"Lesser of", not "greater of". If your excess is $500 and four weeks rent is $2,400, the tenant's liability on an insured property is $500. In practice the excess is usually the binding number.

When the cap does not apply at all

The limit covers careless damage only. Under s49B(1) it does not apply where the destruction or damage was:

• intentional, by the tenant or someone they are responsible for; or
• the result of an act or omission on or about the premises that constitutes an imprisonable offence; or
• the result of keeping a pet on the premises.

That third one surprises people, and matters more since pet bonds arrived: pet damage sits outside the cap entirely, alongside deliberate damage. A pet bond of up to two weeks rent is a separate mechanism, not a substitute for that liability.

The intent distinction is about the act, not the size of the outcome. A tenant who leaves a pot on the stove and starts a fire has been careless, however large the bill. A tenant who punches a hole in a door has not.

Fair wear and tear sits outside all of this and is always the landlord's cost. Worn carpet in a hallway after four years is not damage.

What this does to your insurance decisions

Because the tenant's exposure is capped at your excess, your excess is now doing two jobs: it sets your own cost on a claim, and it sets the most you can recover from a careless tenant.

That produces an uncomfortable trade-off. A high excess lowers your premium and raises what you can recover from a tenant, but leaves you carrying more on any claim that is nobody's fault. A low excess does the reverse. There is no universally right answer, but it should be a decision rather than an accident.

Two practical points:

• A claim usually affects your premium. Claiming for damage barely above the excess can cost more over the following years than absorbing it.
• Tenants can ask for your insurance information. Landlords must make the relevant insurance details available, so a tenant can find out what the excess is. Plan on that being known rather than assumed.

The part that decides the argument

Nearly every tenant-damage dispute comes down to one question: what did it look like when they moved in? Without an answer, "damage" and "fair wear and tear" are just two opinions.

What resolves it:

• A dated entry inspection with photographs, room by room, including the things nobody photographs: oven interior, carpet edges, wall corners, window seals.
• Routine inspections during the tenancy showing when the condition changed. Entry for a routine inspection needs 48 hours to 14 days notice, between 8am and 7pm, no more than once every four weeks.
• An exit inspection against the same checklist, so it is a comparison rather than an impression.

Photographs with no date are close to worthless. Photographs of the same angle at entry and exit are close to decisive.

Bond is not a self-service account

You cannot simply help yourself to the bond. It is held by Tenancy Services and released either by agreement or by order. If you claim a deduction and the tenant disagrees, it goes to mediation and then the Tribunal, where you will need the evidence above.

Claiming for fair wear and tear, or for the full replacement cost of something that was already half-worn, is the fastest way to lose a claim you would have partly won. Betterment matters: replacing a six-year-old carpet with a new one leaves you better off than before, and adjudicators account for that.

If you are the tenant

Photograph the property at move-in on the day you get the keys and keep the originals with their dates. Report damage as soon as it happens, because s40(1)(d) requires it and because concealment turns a capped careless-damage claim into an argument about intent. If a deduction is proposed that you think covers wear and tear, say so in writing and use free mediation.

Where RentManager fits

This is an evidence problem, and evidence is a workflow. Inspections in RentManager use reusable per-property checklists with photo capture, so entry, routine and exit reports are directly comparable and every image carries its date. Maintenance requests raised from the tenant portal are timestamped on arrival, which is what separates "reported immediately" from "found at the exit inspection". Bond details, including the lodgement reference, sit on the tenancy.

Related: who pays for rental repairs and the Landlord Hub.

Common questions

How much is a tenant liable for if they damage the property?

For careless damage to an insured property, the lesser of the landlord's insurance excess and four weeks rent. If the property is not insured, the limit is four weeks rent. The cap does not apply where the damage was intentional, resulted from an imprisonable offence, or was caused by keeping a pet, in which case the tenant can be liable for the full cost.

Does the cap apply once, or to each incident?

The limit in section 49B is expressed per instance of destruction or damage rather than as a single ceiling for the whole tenancy, so separate careless events are generally treated as separate liabilities. If a dispute turns on that point it is worth taking advice, because how incidents are grouped can be argued.

Can I just take tenant damage out of the bond?

Only with the tenant's agreement or a Tribunal order. Bond is held by Tenancy Services and is refunded on agreement between the parties; if you disagree about a deduction, it goes to mediation or the Tribunal. Making a unilateral claim without evidence is how landlords lose otherwise sound cases.

Is fair wear and tear the tenant's responsibility?

No. Fair wear and tear is always the landlord's cost. Worn carpet, tired paint and aging appliances in normal use are the cost of owning the asset, not something to charge to a departing tenant.

General information about the Residential Tenancies Act 1986, current as at August 2026. Insurance policies differ; check your own wording. Not legal or insurance advice.