There’s a clause in landlord insurance policies that states that the policyholder is obligated to minimise losses. In light of COVID-19, now more than ever, landlords and agents need to be proactive so they can meet this requirement.
Back in ‘the good old days’ (pre-COVID), once a landlord had purchased the right investment property, protected it with the right landlord insurance, and engaged a great property manager to find the best tenants and look after the rental, they could pretty much set and forget. The events of 2020 turned that philosophy on its head.
COVID-19 has meant that both self-managing landlords and those with agents have had to get more hands-on with their investment – and agents have had to up their game. The economic and social devastation that has come in the wake of the ‘corona crunch’ has presented many challenges for those who own and manage rental properties, and those who insure them – from government mandated eviction bans and rent freezes to rental inspections being prohibited, it was no longer business as usual for many.
To reduce the risk of losses, landlords and agents have had to get on the front foot of issues – never more so has being proactive been a fiscal imperative.
At EBM RentCover we add value to clients by being a voice of knowledge in times of uncertainty. These are certainly uncertain times, and we are working with landlords and agents to navigate the ever-evolving investment property landscape. To this end, here are a few ways you can proactively manage rentals to reduce the risk of losses…
Good communication with tenants was important before the outbreak, now it’s vital. COVID is playing out differently for different people, so it’s important to keep in touch with tenants as the pandemic continues. If all parties can be open and honest, issues can be quickly and effectively addressed.
Physical distancing is no excuse for going silent – there’s a myriad of tech available to help you keep in touch including Zoom, Skype and Facetime. Not only can you use digital platforms to check in with tenants, but you can also leverage technology to conduct inspections and be alerted to property issues.
Be prepared to negotiate
In most jurisdictions, emergency tenancy legislation and requirements made negotiating with tenants mandatory. In many cases, negotiating a rent reduction or freeze was not an option but a necessity – and failing to do so could have ramifications from being ineligible for rent relief incentives and having cases thrown out of courts or tribunals, to jeopardising landlord insurance cover (failure to follow legislated requirements can invalidate an insurance claim).
Beyond the legal requirements, working with tenants in financial hardship can be a way to secure a loyal and long-term tenant. If your tenants were otherwise ideal, cutting them some slack (if it is economically feasible for you do so) as they recover from the fallout of the pandemic may be beneficial for everyone (especially if the rental is in a location with high vacancies and falling rents).
As emergency provisions have been extended in many jurisdictions, in some cases the financial support available for tenants and landlords has too. If a tenant or landlord is facing financial hardship due to COVID-19, explore what government relief packages might be available (e.g. rent subsidies, land tax relief etc.). Advise tenants of any support available but be sure not to offer ‘financial advice’ (e.g. suggesting they access their super to pay their rent).
Know your legal obligations
There is plenty of legislation, rules and regulations governing the leasing of residential property. As a landlord or agent, you must be aware of the laws that apply in your jurisdiction. Breaching obligations is something no-one wants to deal with (potential fines, blacklisting, voiding insurance cover), so it is particularly important to keep abreast of the changes that are implemented to address COVID. For example, in many jurisdictions, some (but not necessarily all) emergency provisions have been extended past the initial six-month period.
It is also important to understand tenant obligations, especially in respect to rental payments, as the moratorium on evictions does not give tenants carte blanche to stop paying their rent. To be eligible for protection, renters must meet strict requirements before they can claim financial hardship as a direct result of COVID-19.
The pandemic resulted in unprecedented, albeit temporary, changes to tenancy legislation, and ignorance of the changes is no excuse – it won’t fly with the courts or your insurance provider. In the event you need to make an insurance claim for loss of rent, having followed the legislated requirements will be crucial to the claim’s success.
Keep up with property maintenance
Adequately maintaining the rental is not only a legal obligation (e.g. providing a safe home for tenants and visitors), but also a requirement set out in a landlord insurance policy. It’s also very wise to make sure the property is prepared to withstand the forthcoming disaster season!
The restrictions on non-essential repairs and maintenance in some jurisdictions have mostly been lifted and tradies can now return to properties to carry out works. Being proactive when it comes to repairs and maintenance helps to ensure the landlord meets their obligations – and reduces the risk of avoidable damage at the rental.
Screen prospective tenants thoroughly
Regardless of whether the rental is in a hard or soft market, if the property is advertised for lease it’s imperative to properly screen prospective tenants. Foregoing the usual checks (employment, income, reference, tenancy database etc.) in favour of securing a quick re-let can be fraught. If a ‘bad tenant’ takes possession of the rental, it can be a long, drawn-out and very expensive proposition to regain possession, unpaid rent or damage costs.
Ensure landlord insurance premiums are paid
We aren’t being facetious, it is important that if a landlord insurance policy has been taken out that the premiums are paid on time. If payments are outstanding and cover lapses, the landlord is uninsured and can’t make a claim if something happens.
It isn’t only tenants that have faced financial hardship as a result of COVID-19, many landlords have also suffered. But letting an insurance policy lapse through non-payment is a false economy. Without insurance, the landlord is left to face any costs associated with unpaid rent or damage at the premises. In worst case scenarios, they could also be on the hook for hundreds of thousands of dollars in liability claims if someone is injured, or worse, at the property.
In much the same way that landlords and agents should talk with tenants to address financial hardship matters, they should also get in touch with their insurer to see what can be done to ensure the property remains covered if things are tight.
If you are a client of EBM RentCover and have any questions about cover and claims, please touch base with the team on 1800 661 662 – if you need us, we are here.
*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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Read on for an update on where things stand with COVID-19 and landlord insurance…