Are you a ‘host’ or a ‘landlord’? The answer to this question determines whether you can get landlord insurance if you are using your property for Airbnb.
Airbnb and other share economy accommodation platforms are having a resurgence. After an extended period of staying at home, holidaymakers are venturing out as intrastate and interstate travel restrictions ease and a ‘travel bubble’ with New Zealand comes into effect. This is a boon for tourism, hotels and other accommodation providers – which means people with property (especially in cities and popular holiday destinations) may be thinking about hitching their train (well, their home) to the Airbnb wagon.
Landlord insurance is an important safeguard for people leasing their property as it protects against the common risks landlords may face such as damage from insured events like natural disasters or theft, legal liability, and tenant-related risks like accidental or malicious damage and, depending on the type of policy, loss of rent.
EBM RentCover was one of the first, and is still one of few, landlord insurance providers to offer a policy tailored to the short-stay accommodation market. This policy protects landlords, who rent properties for less than six months at a time including holiday homes, Airbnb accommodation and serviced apartments, against certain leasing risks. A RentCover ShortTerm policy can cover both the building and contents.
But it is important to understand that this is a landlord insurance policy, which means it is designed for owners of investment properties (real estate purchased to generate income). So not everyone who puts their home on a platform to be rented out can access short-term landlord insurance.
Here are three short-term/Airbnb letting scenarios to explain the difference.
An owner uses Airbnb to let their holiday home or investment property for short stays (less than six months at a time). The property being let is not the owner’s principal place of residence (e.g. their own home) and it is used to generate an income, which means it meets the ATO’s description of a residential rental property. The owner is ultimately providing ‘temporary residential accommodation’. By this we mean, short-term accommodation for periods ranging from one day to six months at a time provided that such accommodation is not subject to any tenancy agreement (other than for holiday letting or similar short-term purposes).
Can the owner get short-term landlord insurance? Yes, they can. Because they are leasing an investment property for short periods, and they are providing an entire property, which is not their main residence, for a guest to temporarily rent. This makes them a landlord.
An owner uses Airbnb to let their main place of residence for short stays. They may rent their whole home or just a room to a guest for however long. This sort of ‘home stay’ was the basis for share economy accommodation platforms like Airbnb in the first place – owners sharing their home with a paying guest.
Can the owner get short-term landlord insurance? No, they can’t. Because they are not using the platform to rent out a holiday home or investment property, they are simply sharing their own home with a paying guest. They may be deriving a taxable income from renting out their own home, but the home is not considered to be an investment property as it is primarily for personal use. This makes them a host. Hosts should check the insurance/guarantees offered by the platforms for cover in relation to guest damage and also check for any exclusions on using their home for such in their home and contents policy. FYI: EBM RentCover does not consider regular B&B properties as investment properties – these stays are not landlord/tenant relationships but host/guest set-ups, covered by different legislation and rules to residential rental properties.
Heads up: A boarding, lodging or rooming house is also a whole other kettle of fish. These accommodation arrangements, and others where there are multiple leases on the one property, are not covered by EBM RentCover landlord insurance policies.
A tenant leases a home and then uses Airbnb to rent it out (sub-lease) to guests. This is known as professional sub-letting.
Can the owner get short-term landlord insurance? No, they can’t. If an investment property is leased under a tenancy agreement (other than for holiday letting), it is not considered a short-term rental. Landlord policies that cover standard leases may be available. But – and it’s a big but – if the owner knowingly allows their tenant to sub-lease the premises, they void their policy. Sub-letting is prohibited in all EBM RentCover landlord insurance policies (it simply poses too many risks). If the owner is not aware of what their tenant is doing, they may be protected against certain risks though.
What about the tenant? Can they get short-term landlord insurance? No, they can’t. Landlord insurance is designed to cover the owner of an investment property against defined risks. Only the owner of the property can take out insurance to protect the premises and the income they derive from it, a tenant cannot. In any event, sub-letting is not covered by landlord insurance. Tenants looking at using their rental to occasionally host guests or to professionally sub-let the premises should check that their tenancy agreement permits using the premises for Airbnb and/or sub-letting.
The takeaway is that short-term landlord insurance is designed for owners of investment properties offering the premises for rent on a temporary basis. It is not available to homeowners renting out their own home to guests or to rental property tenants renting or sub-letting to guests. If you would like to know more, contact the EBM RentCover team on 1800 661 662.
*While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you need us we are there, contact 1800 661 662 if you have any questions.
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