Less morbid curiosity, more stark reality

It’s something that no agent or landlord wants to think about, but the death of a tenant is something many could face. Do you know what to do in the event of tenant death to save you from confusion, stress and even legal problems?

In an ideal world, no agent or landlord would ever be confronted with the death of a tenant at a rental. Sadly, the reality is that many will have to deal with just that eventuality. Whether a lone tenant simply passes peacefully in their sleep or the death is far more traumatic, both landlords and agents need to be prepared. This means knowing what the implications are for the rental property and also your obligations.

Financial ramifications
The death of a tenant is not only emotionally challenging (especially if the landlord or agent finds the body[1], which often happens when chasing up unpaid rent[2]), it can also have serious financial ramifications.

The financial costs vary depending on the circumstances. There can be direct costs in terms of loss of rent and clean-up, and indirect costs if a property is slow to re-lease (possibly due to the stigma of being associated with a traumatic event).

Each year EBM RentCover handles 15-20 claims relating to a death of a tenant. As these recent examples show, it makes sound financial sense to have a landlord insurance policy that provides financial protection against losses incurred due to tenant death.

Claim example 1:
Police were called to the property after neighbours complained of an unpleasant smell emanating from the home and found the tenant had passed away. The home was contaminated by bacteria and odour, which required forensic cleaning and removal of all soft furnishings ($9,000). All of the furniture (the home was let fully-furnished and the policyholder had cover for loose contents) also had to be replaced ($11,000 for replacement furniture, $4,500 to replace the carpets). The landlord was also able to claim for loss of rent during the course of the repairs ($2,000) and, as the tenant was on a fixed-term lease, for six weeks’ ($2,100) while they found a new tenant.

Claim example 2:
While absent from the property, the tenant passed away suddenly. As the tenant had paid their rent in advance, the rent paid beyond the date the tenant passed away was refunded to the tenant’s estate, together with the bond. As the tenant was on a fixed-term lease, the landlord was able to claim for six weeks’ loss of rent ($2,550) while they found a new tenant.

Claim example 3:
The agent received notice from the police that the tenant had passed away in the property. Although the tenant’s rent was paid up to date (as they had a direct debit set up), it took eight weeks to locate the tenant’s family and arrange for them to remove the tenant’s belongings from the property. A loss of rent claim was paid to cover the eight weeks ($2,360 – as the tenant was on a periodic lease, loss of rent during re-tenancy was not applicable).

What happens when a tenant passes
Dealing with a deceased tenant’s family and friends requires tact, sensitivity and compassion. And while it may be difficult to negotiate issues like clearing out possessions or ending the lease with the deceased’s executor/next-of-kin, it needs to be done so that financial losses can be minimised.

The simple fact is, most property investors cannot afford to be without rental income indefinitely, making it important to understand the protocols and procedures to follow when dealing with tenant death.

Landlords and agents must follow the state and local laws applicable for appropriately handling tenant deaths at rentals – serving notices, terminating leases, returning bonds, disposing of tenant possessions, disclosures etc. Failing to do so, could pose legal issues.

One of the main aspects to understand 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. The owner is entitled to have rent paid (from the bond or estate) until the lease is terminated and regain the property in the state it was in at the start of the lease (with fair wear and tear excepted).

If a sole tenant (i.e. only tenant on the lease) passes, the landlord/agent must follow their state’s procedure for ending the lease and returning the bond. It should be noted that the deceased tenant’s property, debt and contracts transfer to the estate or next-of-kin. This includes their rental agreement and in most states landlords can hold the estate accountable for any unpaid rent for the remainder of the lease term, though most landlords will show compassion and work with the family/executor and allow them to terminate the lease and move the deceased’s belongings. The next-of-kin/executor is responsible for rent and for providing vacant possession – they need to deal with the tenant’s possessions and arrange cleaning of the property (including any specialist cleaning required). The landlord is entitled to access the bond as they normally would (for unpaid rent, damages and any other costs established in the lease agreement) and any remaining bond monies become part of the tenant’s estate (provide an itemised list of deductions made from the bond and provide that to the executor along with any remaining funds).

In cases where sole tenants pass away, landlords can often face prolonged periods where no rental income is generated, due to the time required to re-instate the premises, track down next-of-kin to remove possessions or, if the state trustee is made responsible, the time taken for the possessions to be auctioned off and funeral held. Landlord insurance can 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 can also respond to forensic cleaning and repair costs etc. if the next-of-kin/executor fails to foot the bills.

If a co-tenant dies (i.e. joint tenant), this also does not automatically end the lease. The tenancy can simply continue but in most states the remaining tenants are under no compunction to do so and landlords/agents can negotiate with them to terminate the lease early and take vacant possession. If the co-tenant chooses to stay on, their rights and responsibilities continue under the tenancy agreement (they become ‘the only tenants’ responsible for all matters and this means they can’t blame arrears or property damage on the deceased tenant) – and this includes the requirement to pay rent. If a co-tenant is not able to and stops paying rent, an insurance claim may be able to be made under a different section of the policy (e.g. rent default) to cover the rental losses.

Making an insurance claim
Chances are, if a sole tenant passes away, the landlord will need to make a claim on their insurance for loss of rent and even for forensic cleaning expenses. To assist with an insurance claim, the landlord/agent should:

  • When notified of a tenant’s passing, secure the property –
    • make sure the doors and windows are locked (consider changing the locks if you are permitted by law to do so, as this stops others with keys from being able to enter the premises and remove items before an executor takes charge) and ensure any pets are taken care of
    • make sure not to remove any items from the home
    • take a video of the property and its condition upon your entrance (documenting tenant possessions, state of the home etc.)
    • take a witness with you when you enter the premises (at the least, use a smartphone to record your entry)
    • do not let the deceased’s family or friends inside without accompanying them and do not let them take anything; if clothes for the deceased or photos for a memorial service etc. are taken from the home, make sure to document this
    • 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 etc.
  • Contact the insurer to check cover inclusions and what paperwork is required
  • Open the lines of communication with the deceased tenant’s executor/next-of-kin so you can discuss transitioning the rental property back to the owner
  • Get written notification of a tenant’s death from their executor or next-of-kin, as the notice is important when it comes to recouping any financial loss, assisting family members and transitioning the property for new occupants (insurers require a copy of the death certificate, if one is not available, talk to the insurer about whether other documents, such as a published funeral notice, can be supplied instead)
  • Liaise with the executor/next-of-kin about vacating the property and disposal/removal of the tenant’s possessions – offer contacts for companies which might be able to help pack, sort or store possessions until the family is ready to deal with them
  • When the property is vacated, have the home cleaned (specialist cleaning may be required) if the executor has not already done so
  • Keep all receipts and records to assist with your claim
  • Document all contact with the deceased’s executor/next-of-kin and keep excellent records about any actions you take regarding the property
  • Advertise the property for re-leasing as soon as practicable (be sensitive about the timing of open for inspections or other contact, for example the timing of the funeral) and keep written evidence of advertising activity
  • Once the property has been re-let, submit an insurance claim with relevant supporting documentation

Landlords and agents have peace of mind knowing that the financial strains that accompany tenant death can be alleviated by insurance cover. In addition to cover for damage and forensic cleaning costs, RentCoverUltra and RentCoverPlatinum policies cover rent arrears and loss of rent that accrue while the tenant’s goods are removed, the property is cleaned and the period of vacancy until a new tenant is found (subject to the terms, conditions, exclusions and provisions outlined in the PDS). RentCoverShortTerm policyholders are also covered for damage/cleaning and for loss of rent due to tenant/guest death. Our caring and compassionate Centre of Expert Care team members are always on hand to assist with claims during difficult times.

 

[1] If you find a deceased person at the rental, leave the property trying not to disturb anything and contact the police immediately. They will handle formalities like contacting next-of-kin. You will need to liaise with the officer-in-charge of the investigation to ascertain when access can be expected etc. It should be noted that when the property is released by the police, it will be in the same state in which it was found, minus the body. Generally, the police will not arrange for the premises to be cleaned or damaged contents removed (even in traumatic death cases/crime scenes), they can, however, provide contact details for forensic/trauma cleaners.

[2] If you suspect that something has happened to a tenant at the property, you can contact the police and request they undertake a welfare check. If you choose to visit the property yourself to check on the tenant, do not enter the premises if there is an unpleasant odour emanating from the home or if you can see blowflies on the inside of windows or doors. Immediately contact the police to attend the property.