EPMEPM: Best Practice & Legislation

Expect the Unexpected

When times are tough you need to be proactive in finding ways to add value for your clients. Communicating the benefits of landlord insurance might be an initiative that saves them thousands. Jan Malmstrom discovered some scenarios where appropriate insurance meant happy landlords.

For a property manager, there is also an obligation to the landlord to minimise their loss by preparing the property for re-letting as quickly as possible.

When travelling overseas most of us wouldn’t dream of going without the protection of travel insurance. Many people are aware of the availability of insurance to insure our health, our cars, our personal possessions, homes, boats and caravans, but when it comes to insuring against loss of rent or damage to an investment property, some people aren’t aware that this type of insurance is available.

Property Managers can alert their clients to the availability of landlord insurance and provide them with information on the companies who can provide this insurance and how to acquire this type of cover.

Peoples’ lives change; they lose their jobs; they divorce; our population is much more mobile and transient; tenants decide they want to live somewhere else – so that’s what they do. Obviously these things don’t happen with the vast majority of tenants, but they do happen and could cause the landlord financial hardship.

The following claims scenarios illustrate where landlords have been able to make claims for unforseen events.

Not so bright
On a dark and muggy night in Queensland, a tenant decided to turn out the lights and light a candle to create a cooler atmosphere. Later, they decided to go to the kitchen, “just for a moment” to get a cool drink. At this time the telephone rang and, unbeknown to the tenant, a strong gust of wind came from the slightly open window in the living room, blowing the curtain toward the very small flame of the candle and set the curtain ablaze. The tenant then walked back into the room, to find the corner completely on fire.

The landlord had insurance which covered the events in this case. Fortunately, the damage was limited to the one room, however, still amounted to thousands of dollars. It’s an example of a completely innocent action causing severe damage that no one could have predicted – certainly not the landlord or the Property Manager.

A very, very Good Friday!
A tenant arrived home from a very eventful Good Friday evening after consuming a few too many beverages which left him feeling a bit under the weather. In an attempt to freshen up, the tenant took a shower during the early hours of the morning. A few hours later, the tenant woke to find that he was lying on the floor of the shower, blocking the drain and the unit was now ankle deep in water!

The landlord had insurance cover which protected the landlord against the not-so-smart actions of this tenant and allowed the water damaged carpets to be replaced. This is another perfect example of a completely unforeseeable event that no landlord, property manager, or even the tenant could have predicted.

Death of a sole tenant
Unfortunately claims are sometimes made for rent loss due to a tenant passing away. This is an emotional time for the tenant’s family, so care and sensitivity must be the number one priority. For a property manager, there is also an obligation to the landlord to minimise their loss by preparing the property for re-letting as quickly as possible. In a claim where a sole tenant passed away unexpectedly, loss of rent was covered until the property was re-let. This meant the landlord was entitled to six days rent arrears, 15 days for time to have the tenant’s belongings removed and a further 20 days through to when a new tenant was found. The landlord received a total of $1820.00, which would have eased a little of the financial pressure created as a result of this unfortunate event.

Landlord protection insurance is a relatively new facility. Years ago when tenants left property owing rent or maliciously damaged a property, landlords had no option other than to write off the unpaid rent and bear the cost of repairing the damage. With the protection now available, the landlords do not need to suffer this financial loss. Are you making your landlords aware of the availability of landlord protection insurance?

Claims example information provided by Terri Scheer Insurance Pty Ltd 25/05/2010 and is based on claims made under their landlord insurance policy. Terms and conditions of cover will vary.

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Jan Malmstrom

Jan Malmstrom has had 35 years in the real estate industry, always with a specific interest in property management. Jan is currently Head of Property Management at Investors Direct. For more information visit: idfg.com.au