It’s your tenants’ home, but it’s your investment property. This clash often leads to a bit of argy-bargy between tenants and landlords when it comes to respective rights and responsibilities.
Misunderstandings can often result in tensions and, in worst case scenarios, the parties wind up at tribunal – an experience that can potentially escalate a poor relationship into an irretrievable one and often at great expense to everyone involved.
A lack of understanding about responsibilities can potentially impact a landlord’s insurance too. Here are five landlord rights and how they could impact insurance.
1. Evict tenants for no reason
In some states/territories, it is possible to evict tenants for no specific reason.
However, regardless of whether landlords can evict for no reason or otherwise, it is important they follow the correct procedure for legal eviction. Landlords looking to end a tenancy should check the reason they want to terminate the agreement with their tenant is actually allowed in their state and what paperwork they need to fill in.
When it comes to insurance claims for loss of rent or tenant damage, the eviction process must be complete prior to submitting a claim. Landlords should act quickly to limit losses, and again… it is imperative they follow the correct procedure.
2. Make claims on the bond
The rental bond is paid by tenants at the start of their tenancy as a financial safety net for landlords in the event the tenant breaches the terms of the lease agreement. At the end of the tenancy, the bond is returned to the tenant in full, unless the landlord makes a claim against the money.
Although the bond is the tenant’s money, landlords can make a claim on the bond for:
As the value of the bond is often less than the costs incurred, landlords will often rely on their insurance to cover the shortfall. It is a condition of most landlord insurance policies that the landlord collects a bond from their tenant before cover for loss of rent or other policy features is applied. Any payout will also be less than the bond amount.
3. Inspect the property and arrange repairs
The frequency and conditions around inspections – such as on what days, at what times of day, and how much notice must be given – are set out in state/territory legislation.
Tenants cannot stop a landlord from inspecting their property if the conditions are met, nor can they refuse the landlord or a tradie access to the property to carry out repairs as long as arrangements have been agreed.
When it comes to emergency repairs, the landlord may not need to provide any notice to the tenant, as they have an obligation to remedy urgent damage within statutory timeframes or risk being in breach of the tenancy agreement and possibly legislation. If the property suffers damage, the landlord has an obligation under their insurance to prevent further loss and must make the property safe.
4. Require tenants to undertake maintenance
Subject to state/territory residential tenancy legislation, a landlord can make tenants responsible for undertaking some maintenance chores and these should be outlined in the tenancy agreement.
However, there are times where it is best for the landlord to arrange for certain maintenance to be undertaken. For example, if the property has high ceilings it would be best to arrange for a tradie to change the light bulbs, given the risk posed by asking tenants to climb a ladder. Or arrange for smoke detector batteries to be changed, to ensure that it is actually done and the property is both legally compliant and protected.
From an insurance perspective, tenants should not be made responsible for any task that could put them in danger, requires expertise in maintenance or requires specialist equipment, as doing so would present a liability risk.
It is a condition in practically all building insurance policies that the property must be adequately maintained. Failure to do so could void the landlord’s insurance. Before allowing tenants to perform anything other than basic household chores, such as maintenance or repairs, landlords should check with their insurer that this is okay.
5. Switch property managers
If your agent fails to secure good tenants or properly manage the investment property, there is an increased risk of the rental suffering damage and losses.
When a landlord enters into a property management agreement with an agent, they are agreeing to pay for specified services. And they have the right to expect those services to be performed professionally, efficiently and in a timely manner.
If a landlord is not happy with the service their agent is providing, they can switch agent, sometimes without penalty. Depending on the agreement, a landlord may be able to terminate the contract without penalty if the property is vacant. Otherwise they can do so by serving the appropriate notice.
Generally when a landlord chooses to switch agents, the new agency will get the landlord to send a letter to their current property manager and then will handle the transfer process. Some agencies will also waive their fee for a period so the landlord doesn’t pay twice.
Even if there is a cost in switching agents, it is likely to cost a landlord a lot more to leave their property with an agent who isn’t looking after it.
At EBM RentCover we empower landlords with the tools and knowledge they need to make informed decisions about landlord insurance and offer reliable solutions to help them feel confident they are well protected.
By Sharon Fox-Slater, managing director of EBM RentCover.