When damage occurs in a rental property I often spend quite a lot of time explaining to the landlord what type of damage it is and whether claims can be made through insurance or from the tenants. One of my colleagues passed on a fantastic break down of the types of damage by Terri Scheer Insurance (acknowledgement only, you should choose your insurer based on your individual circumstances), so I thought I would share it with everyone…
Accidental Damage: An unexpected or sudden loss. This is generally something that is an accident and not planned or intentional. Examples include spills on carpet or furniture.
Malicious Damage: Damage which was motivated by spite, malice or vindictiveness with the intention of causing damage. Examples include holes kicked/ punched in walls and doors, graffiti and doors knocked off their hinges. A police report is required for malicious damage claims.
Deliberate Damage: An act that will alter the current state of an item, however the act is carried out without any spite, malice or vindictiveness. An example is putting picture hooks into walls without permission. This is not a vindictive act, it is however a deliberate action however generally with the intent of making the property more homely.Wear and tear: Damage which occurs naturally and inevitably simply because people reside in the property. Wear and tear occurs just as much in an owner occupied property as it does in a rental property and may include scuff marks on walls, carpet in walkways appearing worn, small marks on lino etc. Wear and tear and poor housekeeping are not generally covered in an insurance policy, even where a property may be brand new prior to being occupied by tenants. Landlords should expect fair wear and tear to their property, as would happen in any home that is being lived in.
I'm not an insurance broker, but for anyone who doesn't have a landlords insurance policy – make sure you get one! If you have an apartment especially, building insurance is often not enough to cover contents such as carpets & blinds, loss of rent or public liability. There are some great companies out there offering extensive cover for under $300 a year, just make sure you check the policy details before signing up to ensure they will cover you (some companies won't insure self managed properties or properties where a tenant is not on a fixed term lease).
Happy to share a few damage stories that underline why insurance is so important if anyone's interested.
Great post, excellent idea and very useful.
cheers
thecrestthecrest | Tony Neale - Statewide Motel Brokers
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Thanks Kristin – excellent explanations.
Cheers, TraceyKristin Simondson PBRE wrote:Happy to share a few damage stories that underline why insurance is so important if anyone's interested.Sounds good, would be instructive.
itsandrew
Go as far as you can see and you will see further.
With respect to malicious damage the police are not always willing to issue a report and say that it is a civil matter as I have found. They gave their ID over the phone and said that the insurance rep can contact them to verify the damage. The insurer that requested the report and were diligently trying to minimise the claim amount told me that this happens a lot and they accepted this and paid out.
Here's a classic about an apartment I managed:
This client had been with our agency just over 10 years and believed we were doing such a good job with tenants he would never need insurance. Despite the fact we'd sent out information on the reasons to have insurance (damage of contents etc.) and information on companies who provide broad coverage for low premiums, this client never took out a policy.
We'd recently leased the client's apartment to a highly recommended tenant for top market rent and all was looking good… until a water pipe burst in the building at 3am on a Sunday morning (2 months into the tenancy) and flooded 4 apartments in the building.
The pipe was 'common', it serviced the building and is under the maintenance of the Owners Corporation. The tenant called us and another resident had arranged the building's emergency service to attend to stop the water flow. The carpets were soaked in 20cm of water, the bathroom vanity & skirting boards in the kitchen were damaged and the tenant's bed and furniture was ruined to the tune of $5000 for replacement. To top it off, the tenant could not reside in the property for 8 days as the carpet had been lifted to be dried. The tenant was extremely understanding and flexible and rather than leaving it to us to arrange alternative accommodation, she had made arrangements to stay with a friend until we could get her back in the apartment.
The tenant allowed me to inspect the property every day to check on progress and I took the owner through the first day. It was quite alarming how much damage was done – the bathroom ceiling was cut out for access to the pipe, the ceiling in the bedroom had a large crack down the centre and all the carpets were lifted to allow large fans to dry the underlays.
I had arranged the Owners Corporation to see to all repairs to be included in a building insurance claim. Problem was, the building insurance policy does not cover contents, so the carpet (drying, cleaning, replacement) and tenants damaged furniture was not covered in the building insurance policy even as resultant damage.All in all, the damage bill that was not covered by the building insurance was as follows:
– Rent reimbursement to tenant $400
– Reimbursement to tenant of travel expenses $170 (not required, negotiated as the owner wanted to keep such a good tenant)
– Carpet drying, cleaning and re-laying $1,200The total costs incurred were $1,770… Compared to the landlords insurance policy we had recently offered… $259 with no excess on water damage.
Thankfully the tenant is not chasing the landlord via the Tribunal for compensation for replacement of her goods, she has conceded she should have got her own insurance. Whilst there is no specific reference to this type of situation in the Residential Tenancies Act, it is likely some compensation would have been awarded to the tenant via the Tribunal. this would not be covered by a building insurance policy, but the landlords insurance policies we work with would cover it.
All in all, the situation was resolved without the tenant being released from her lease or having a rent reduction (the property is now not in a slightly damaged state which the client does not want to repair) or compensated via a VCAT tribunal and the client has now agreed to have insurance for the future…
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