When Bad Things Happen to Good Tenants

Photo: WayTru, Creative Commons

Even the best tenants can’t guarantee that a landlord’s asset and income will be safe, as many landlords who have needed to lodge a landlord insurance claim would know.

One poor tenant had been teaching his wife to drive. After colliding with the mailbox, she panicked and hit the accelerator rather than the brake, driving through the front door of the property.

Another case involved a burglary, where intruders ruined the tenants’ possessions as well as the landlord’s carpets, curtains and blinds.

A third involved a fire in the basement car park of an apartment block, which caused extensive smoke damage to the landlord’s investment.

Some property investors are under the mistaken impression that having a professional property manager means they can do without landlord insurance.

Although a professional property manager can be a big help in reducing the risks posed by tenants, they won’t protect you from all eventualities. Even the best tenants can experience situations beyond their control – leaving rental properties damaged and unable to be let.

“Some property investors are under the mistaken impression that having a professional property manager means they can do without landlord insurance.”

An asset worth hundreds of thousands of dollars should be professionally managed and fully protected by insurance, but research shows one in five landlords who use professional property managers don’t have landlord insurance.

As with any type of cover, landlord policies need to be periodically reviewed to ensure the sums insured are up-to-date as rents, repair costs and property values change.

Landlord insurance covers lost rent due if a property can’t be tenanted because of damage.

Property owners who do have a landlord insurance policy are advised to carefully check the fine print as some policies only cover malicious damage, not accidental damage.

A recent incident, in which a St Kilda tenant ‘renovated’ and expanded his apartment without permission, is an example of the kind of situation where landlords can be exposed.

The tenant cut a hole in a concrete floor and another in a wall to access vacant neighbouring units to give himself extra living space. As the tenant was motivated by a desire for more space, rather than spite, the cost of repairs may not be covered by insurance policies, which only include ‘malicious’ but not ‘accidental’ damage.

For more advice about landlord protection, visit RentCover.