Phil Twyford will carry on with a National bill to clarify and cap tenant liability for damage to property.

The Government will carry on with a bill from the National-led Government which puts some liability on tenants who carelessly damage their rentals.

Former Housing Minister Nick Smith designed the bill in response to a high court decision that had essentially made tenants immune from liability from careless damage to a property.

The bill brings back tenant liability for careless damage but caps it at either four weeks rent or the landlord's insurance excess - whichever is lower. This money would be paid to the landlord, not to the insurer.

Tenants who damage property wilfully, in a way that breached the insurance agreement, or while breaking the law with an imprisonable offense would remain liable with no limitations - meaning an insurance company could sue them.

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The bill also stipulates that a landlord must not provide a rental that they know to have failed a methamphetamine contamination test.

Housing Minister Phil Twyford said last last year that he was not yet sure whether his Government would continue to support the bill. Labour had supported it through its first reading.

On Tuesday he confirmed that they would support the bill through its second and third readings with some minor changes.

"There will be some changes around the part of the bill that deals with contaminated dwellings," Twyford said.

"It's a fairly minor bill in the scheme of things."

At select committee in December the Insurance Council told MPs the bill would drive up rents and premiums, despite it actually adding more liability for tenants.

"This bill doesn't bring us back to the status quo," Insurance Council head Tim Grafton said.

"We believe it will increase protection for tenants who engage in reckless and grossly negligible behaviour...There is no real incentive for a tenant to look after a property."

He said the line between "intentional" and "careless" damage was too blurry.

"As an example: allowing cats to urinate on carpet repeatedly, or fixing a motorcycle in the lounge, these would be classed as careless acts."

When asked by MPs he was not able to put a direct figure on how high he thought the liability cap should be.

"You can put a finger in the air and say [the cap] maybe be $100,000, it may be $200,000."

The Tenant's Protection Association welcomed the cap on tenant liability in their submission.

The New Zealand Union of Students Association felt the liability cap was a "reasonable compromise", but said in their submission they were worried about landlords treating treating every separate incident of damage as a new event - for example three different hooks nailed into a wall drawing in three different liability claims.

Around 600,000 Kiwis live in rental properties across New Zealand.

Twyford is planning a wider review of rental laws later this year but has already tabled a bill to ban letting fees being charged to tenants.