By Hedgie Gundry
From fire and flooding to rental default and malicious damage, landlords’ insurance provides essential risk protection for both landlords and property managers.
Having a fully-insured rent roll not only saves property managers valuable time and money, but also protects against any public liability – an important area of cover which can often be overlooked.
Standard best practice
According to the Real Estate Institute of New South Wales's Business Development Manager John Trani, it’s now standard industry best practice for property managers to discuss the financial risks a new landlord may face and how to manage these risks with a comprehensive landlords’ insurance policy.
"Even though there’s no legal requirement for landlords to have landlords’ insurance, many property management teams now insist on the landlord having this level of cover before they take on a new property. It’s really now standard best practice," he says.
"A good landlords’ insurance policy simply minimises risk for everyone. And it ultimately makes your job easier as it covers things like loss of rent, time spent at tribunals, legal expenses and any damage caused to the rental property.
"One area that’s often overlooked is the public liability protection landlords’ insurance offers not only to landlords, but also property managers. If a tenant has a serious fall within a rental property, they may have grounds to make a negligence claim against the landlord. But what often happens if the landlord has no insurance, is the landlord's solicitor may try to counter sue the property management company.
"If a landlord doesn’t take out landlords’ insurance, property managers need to have a paper trail in place that clearly shows the insurance was recommended either at the time of signing the management agreement or during the time the property is being managed.
"From a property manager’s perspective, professional indemnity insurance may cover them in this instance. But it’s safer for everyone if the property is covered with a good landlords’ insurance policy, including high levels of public liability."
"A good landlords’ insurance policy simply minimises risk for everyone.
And it ultimately makes your job easier as it covers things like loss of rent, time spent at tribunals, legal expenses and any damage caused to the rental property."
Saves you valuable time and money
Managing a fully-insured rent roll also saves a property manager precious time when it comes to coordinating any repairs that may arise.
"If your landlord has a broken water pipe in their strata unit causing damage to the property, they may be up for thousands of dollars in repairs and loss of rent," John says.
"The owners corporation will normally fix the pipe and walls, but the landlord would be responsible for repainting, cleaning and replacing the carpets. Having landlords’ insurance in this situation makes the repair process a lot less stressful for everyone involved."
Similarly, landlords’ insurance will also make a property manager’s job easier in the event of a tenant defaulting on rent payments. If the landlord isn’t insured, the property manager or landlord may need to pursue outstanding money in the local court, which is both stressful and time consuming.
"If a tenant stops paying rent and the landlord isn’t insured, a property manager’s workload increases immensely," continues John.
"Not only does your commission stop during the default period, but if the case ends up at the local court for debt recovery and the tenants are unable to pay a lump sum immediately, you could be chasing rent for years to come.
"With landlords’ insurance, once the claim is made and the funds are released, you’ll receive any outstanding commission. And you can also claim for your time representing the landlord through the policy."
Not all policies are the same
Encouraging landlords to take out landlords’ insurance is obviously a win-win for all concerned. But according to John, it’s also in your best interest to make sure the landlord understands not all policies are the same.
"Landlords’ insurance is one of those policies where a landlord really needs to read the fine print to check the level of coverage," he says.
"When it comes to rental default, some policies will only provide cover for fixed-term leases, but not when the lease is in the continuation period. It’s therefore really important the landlord reads the product disclosure statement thoroughly to ensure the policy meets their needs."
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