How landlords insurance can save Christmas [Property Management Series]

Christmas is traditionally a time when we all relax, let our hair down and enjoy a get-together.

In Australia, that can mean having large gatherings at our homes. When general clumsiness or carelessness, alcohol consumption, troops of kids and moving furniture around to create the right space, are combined, costly damage and drama can occur.

In this article, PM expert, Elizabeth Sargood looks at 4 ways having landlord’s insurance can save Christmas.

Christmas is expensive — what with the gifts, the food, the travel, the decorating, most of us spend a fortune. In fact, Commbank tells us, Aussies spend more than $10 billion collectively  over the festive season.

With so much cash flying out of our wallets and into the hands of retailers, do we really need to spend extra on damage to our investment properties, or repayments when tenants fall behind or leave?

Landlord insurance is often taken out by property owners who intend to rent their property to others, so they are protected against an array of costs associated with owning a leased property.

Though it is often not mandatory property owners have landlord insurance (unless you have a mortgage — the bank will insist on it), it could be an absolute saviour — especially at Christmas time!

1. Landlord insurance covers damage to your property

Let’s face it, sometimes Christmas parties can get a little rowdy — families may clash and face off, games may get out-of-hand, people may just be a little messier and sloppier than usual.

When parties get rowdy, often things get broken, and sometimes getting the money from tenants to cover those costs (especially if they exceed bond) can be a challenge.

Landlords insurance can help your clients manage the costs of repairing damage to property caused by a tenant. While at Christmas time, this may be accidental damage, or even intentional damage as tempers run hot, it might also be damage from weather, as Australia enters into summer and many areas experience destructive conditions like fires or hail.

Encourage your landlords to check their landlord insurance in the lead up to Christmas so they know what is covered.

2. Tribunal and court costs

If a tenant leaves the property in an unacceptable state or falls behind on rent and is evicted, it can be difficult to source funds from their bond to cover costs — because they have to agree to money being taken from their bond.

In this situation, a landlord and a tenant may find themselves at tribunal, trying to have the matter determined for them.

In NSW, attending tribunal often means a landlord will be required to pay additional fees to the property manager for preparation and attendance of the hearing. At the same time, with the tenant disputing the situation, the landlord may also find themselves no longer receiving rent — but still needing to pay the mortgage on their investment.

If your client is the owner of a NSW property but you they reside in another state, the law now says their case will not be determined by tribunal, but by local court — meaning potentially, as well as court fees, they are also responsible for a lawyer’s fees!

Christmas is no different to any other time of the year when it comes to how tenant and landlord disputes are determined — except that, as a landlord, your client may already be out of pocket for gifts, parties, food and other festive season necessities.

Finding extra cash for tribunal or court fees can be the straw that breaks the camel’s back.

While not all landlord insurance is created equal, and each policy differs, a good product will not only cover tribunal fees, but the rental loss during the period of dispute and the period you are trying to find a new tenant (with caveats).

3. Landlord insurance can cover rental loss

Attendance at tribunal or court is not the only time your client will be covered for rental loss, if they have found themselves a robust landlord insurance policy.

Loss of rent can occur for a number of reasons, and one of the most common is the tenant breaking the lease early. While the tenant is usually responsible for paying a break fee, if the vacancy rate is high and finding a new tenant is difficult, the period without rent can exceed the maximum period covered by the break fee.

In this case, landlord insurance can be the hero of the day — especially at Christmas when those costs are piling up! Depending on the policy, landlord insurance will cover the rent loss for a further period, following the end of the break fee period.

Also important to keep in mind, new domestic violence regulations were introduced in 2019 that do permit a victim to break a lease with little or no notice. Landlord insurance can also help cover lost rent in this situation.

4. Landlord insurance and public liability

As a landlord, something your client may not have considered, is what happens when a tenant or one of their guests is hurt or injured on the rented property.

Of course, if they have left furniture in their way or water on the floor, they are likely responsible for their own well-being, but if, for example, a tile has broken and not been fixed, making it a tripping hazard, your client may be accountable for their injury — and their treatment and recovery!

Some landlord insurance policies also provide public liability insurance — this is the insurance businesses have so they are covered if someone is injured on their premises.

As a landlord, being covered in this way can save thousands — a simple broken arm can run up quite a bill when you consider x-rays and ambulances, and more serious injuries requiring surgeons, anaesthetists and hospital stays could absolutely ruin Christmas, both for the injured person and for the landlord!

As a Property Manager, an important part of your role is to help your landlord understand the actions they can take to ensure they and their property are as protected as possible against any kind of unnecessary additional cost.

Make sure you always suggest landlords insurance and highlight some of the essential requirements of the product, so your client is prompted to do their research, find out what is available and select the best solution for their situation.

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