Tenants in this Hamilton flat damaged every room and left their rubbish behind.

Bad tenants are being unfairly let off the hook for property damage after a court decision, landlords say.

The Court of Appeal ruled last week that tenants who caused a fire by leaving oil unattended on a stove in 2009 could not be held financially liable.

The Residential Tenancies Act states tenants can be made to pay for damage caused by neglect or carelessness. The Property Law Act says they are not liable for damage from "perils" beyond their control such as fire, storm, earthquake or volcanic eruption.

Randall Walker This Levin house was destroyed several years ago after a tenant set fire to it.

Landlords and property managers say that while last week's appeal court decision may have been fair, the ruling opens the floodgates for tenants being excused for severe negligence and deliberate damage.

One Christchurch property manager, who did not want his business identified for fear of jeopardising live Tenancy Tribunal claims, said they had lost two applications in the last few days seeking orders for tenants to pay landlords' insurance excesses after damage.

The harm included carpets covered in drink stains and cigarette burns, damaged walls, and ignored plumbing leaks which led to water damage, he said.

"The Tenancy Tribunal said they had made their ruling because of the Appeal Court ruling. They definitely used that as an excuse to exonerate tenants for any damage," the property manager said.

"Neglect is not an accident. Where does it stop?

"What if a tenant gets angry and punches holes in the walls? Wrecks the house with a party? Or strips down a motorbike on the carpet? This opens the door for tenants to do what the hell they like."

The property manager said the rulings would lead to higher insurance premiums pushing up rents, or landlords excluding risky tenants such as families with children. Insurance companies could also insist landlords take only insured tenants, he said.

"The good tenants will have to pay the price for what the bad ones do".

New Zealand Property Investors Federation president Andrew King said they were very concerned at the lack of legal clarity and were setting up meetings with the Insurance Council and also the Ministry of Justice, which runs the Tenancy Tribunal.

"We'll be looking closely at how the Tenancy Tribunal reacts to this (court decision), and we'll be having discussions with them to try and come to a better arrangement. There's now a real grey area between what's malicious and what's accidental," said King.

"If tenants are not held responsible for anything, that takes away that duty of care."

Helen Hodgson, ​property management operations manager for Auckland real estate firm Barfoot and Thompson which manages over 13,000 rental homes, said the Ministry must urgently address the issue.

"The law differentiates between damage being accidental and caused by neglect," she said.

"The naughty tenants will be thinking they can do what the hell they can get away with. That may not be the what the (Appeal Court) ruling intended, but they need to come out and clarify it."

Ministry of Justice spokesman Matt Torbit​ said Tenancy Tribunal adjudicators speak through their decisions, as any judge would, and rarely comment publicly.

The Ministry would not comment on individual cases until hearing and appeal periods had expired, Torbit said.

He said while the Principal Tenancy Adjudicator communicates regularly with adjudicators on case law and other issues of interest, each adjudicator was independent and made their own decisions.