No property manager wants to think about a tenant passing away.
However, many will have to deal with the fallout of a tenant dying, while some may even experience the trauma of discovering the deceased. You will no doubt find yourself trying to balance compassion with minimising financial losses.
The death of a tenant is challenging on many levels, not least of which is handling the legalities and paperwork relating to the rental property. Your landlord is relying on your expertise to help them through the process, so make sure you are aware of the requirements in your area.
Obligations and requirements when a tenant dies
There are state and local laws for handling tenant deaths at rentals which agents must follow, including serving notices, terminating leases, returning bonds, disposing of tenant possessions and disclosures.
One of the main aspects to understand, and convey to your landlord, is that when a tenant dies, the lease does not automatically terminate, nor does the landlord have the right to immediately take possession of the property or remove the tenant’s belongings.
If a sole tenant passes (the only tenant on the lease), you must follow your state’s procedure for ending the lease and returning the bond. It should be noted that the deceased tenant’s property, debts and contracts transfer to the estate or next-of-kin – this includes their rental agreement.
It should also be noted that a tenant dying at a rental can sometimes lead to difficulty in re-letting the property (check to see if you are required to disclose this to prospective tenants). Be sure to understand what the provisions are for loss of rent due to tenant death.
If a co-tenant dies, this does not automatically end the lease either. The remaining tenant can simply stay on – and their rights and responsibilities continue under the tenancy agreement (which should be updated, as should the bond arrangement).
However, if they wish to leave, you can negotiate with them to end the lease and take vacant possession. The notice period for this is set out in the applicable legislation. In most jurisdictions, there is no penalty, or break-lease fee, if the co-tenant wants to end the lease early.
If the owner agrees to allow the tenant to break the lease early, it is unlikely that they will be able to make a claim on their landlord insurance for loss of rent – as the ending of the lease was by mutual agreement, not the result of the tenant defaulting.
The landlord is entitled to receive rent, paid from the bond, the deceased’s estate or from a co-tenant, until the lease ends. They are also entitled to regain the property in the same state it was in at the start of the lease (with fair wear and tear excepted).
If the party responsible for paying the rent fails to do so, the landlord may be able to claim loss of rent on their insurance.
Vacant possession and cleaning
The next-of-kin is generally responsible for the deceased’s rent and for providing vacant possession. They need to deal with the tenant’s possessions and arrange cleaning of the property.
In general, the costs of professional cleaning, including trauma/bio-hazard cleaning, are not covered by insurance. Bond money may be able to be used for this purpose if the responsible party does not fulfil their obligation.
How landlord insurance can respond
Most landlord insurance policies will respond to claims relating to tenant death, but there are varying levels of cover, inclusions and exclusions.
Unlike EBM RentCover, some insurers may not cover damage, while others may not cover rental losses. Landlords and agents should review the policy or contact their insurer to see what is and isn’t covered.
In cases where sole tenants pass away, landlords can often face prolonged periods without rent due to the time required to re-instate the premises, track down next-of-kin to remove possessions or, if the state trustee is handling matters, the time taken for the possessions to be auctioned and the funeral held.
Landlord insurance may respond to loss of rental income in this circumstance, provided the deceased was the only person named on the lease, under the tenant death provisions. Landlord insurance may also respond to repair costs if the next-of-kin or executor fails to foot the bill.
If a co-tenant chooses to remain at the property, they are required to continue paying rent.
However, if they are not able to do so and stop paying, an insurance claim may be possible under a different section of the policy, such as rent default, to cover the rental losses. The legislated procedure for eviction would need to be followed for a claim to be made.
How to assist your landlord with an insurance claim
If a sole tenant dies, the landlord is likely to need to claim on their insurance. Assist your landlord by:
- Securing the property as soon as you are notified of a tenant’s passing (and once access is permitted) –
- make sure the doors and windows are locked and ensure any pets are taken care of
- take a witness with you when you enter the premises and video the property and its condition
- don’t let anyone enter the property or remove anything
- once you are advised of the executor (sight proof), provide them with a key as it is their responsibility to take charge of the tenant’s personal property and arrange cleaning.
- Contacting the insurer to check cover inclusions and what paperwork is required.
- Opening the lines of communication with the deceased tenant’s executor or next-of-kin so you can discuss transitioning the rental property back to the owner.
- Ensuring the landlord gets written notification of a tenant’s death. A copy of the death certificate (or alternative documentation agreed by the insurer) will be needed for the insurance claim.
- Liaising with the executor or next-of-kin about vacating the property and disposal and removal of the tenant’s possessions.
- Keeping all receipts for work, such as repairs, required to return the rental to a lettable state.
- Documenting all contact with the deceased’s executor or next-of-kin and keeping excellent records about any actions you take regarding the property.
- Advertising the property for re-leasing as soon as practicable and keeping written evidence of advertising activity.
- Once the property has been re-let, assisting the landlord to submit an insurance claim with relevant supporting documentation.
Dealing with the death of a tenant is not easy.
At EBM RentCover we offer more than landlord insurance – we offer proactive customer service and support. Our team of compassionate claims specialists can guide you through the process, helping to minimise the emotional and financial stress associated with making an insurance claim, especially in such challenging circumstances.