A landlord policy is similar to a home policy in many ways but has been designed to also reduce the financial impact of loss or damage arising from additional risks that renting out your house brings.
Some options included under landlord policies are things like:
- intentional malicious damage by the tenant
- tenants using or manufacturing methamphetamine leading to contamination of your home
- loss of rent when your tenants need to move out due to damages you need to claim on, or if your tenant abandons the property, or if you need to evict your tenant.
Different insurance companies have different policies, with different limits they will pay and conditions you must meet. Some companies will sell a ‘Landlord Policy’ and some will have a home policy with optional extras or extensions that are often tailored to your needs. Not all landlord policies automatically come with the covers mentioned above, and we recommend you discuss your needs with your insurer.
As COVID-19 will be with us for many months ahead, we have answered here some commonly asked questions:
Q: What are my insurance related responsibilities as a landlord in a COVID-19 environment?
Your key responsibilities have not changed. You must still as far as is practicable and safe:
- take care in selecting tenants (satisfactory references for example)
- collect rent in advance
- collect bond (at least two weeks and register it with the government’s Tenancy Services)
- monitor rent in arrears
- inspect your rental property
Q: What are my responsibilities in a COVID-19 environment for monitoring rent in arrears?
Policies will normally have requirements for you to notify tenants in writing when the rent is 7 days in arrears, personally deliver a second letter to the tenants when the rent is 14 days in arrears (called a ‘14-Day Notice to Remedy’), determine if the tenants are still occupying the property, and apply to the Tenancy Tribunal for a termination order when the rent is 21 days in arrears.
From 26 March 2020 the Government made a temporary change to the law to limit tenancy terminations. The changes gave increased protection for tenants having their tenancies terminated during the lockdown. Those measures applied from 26 March to 25 June 2020. Landlords couldn’t apply to the Tenancy Tribunal to end the tenancy for rent arrears unless the tenant was at least 60 days behind in rent. This was increased from the normal 21 days.
Regardless of the Alert Level that New Zealand is in, tenants are still liable for rent and you can ask tenants to pay what is due. You can also seek a monetary order from the Tribunal for rent arrears in any alert level as any temporary restrictions only relate to the termination aspect of the tenancy. Landlords should try to reach an agreement with their tenants before taking this step.
From 26 June 2020 landlords can give notice remedy a breach of contract or to terminate a tenancy under the standard Residential Tenancies Act 1986 provisions. Usual notice periods will apply from the day a notice is given.
The Tribunal will consider whether it would be fair in the circumstances to terminate the tenancy, taking into account whether the tenant made reasonable efforts to pay rent.
For more information on rent arrears and overdue rent, visit the overdue rent page on the Tenancy Services website.
While the safest way to deliver notice to your tenants is email or by posting in the mail, you might also need to visit the property in person. Always follow the government’s advice on safe contact with others based on the current alert level.
In summary, regardless of the alert level, your obligations under your insurance policy have not changed. You should still:
- ensure you are monitoring rent
- provide a notice by reminding your tenants when they are overdue
- apply to the Tenancy Tribunal for a termination order
If your tenant is finally evicted or abandons the property in the meantime and you have suffered a shortfall in rent, then if you have cover under the policy for loss of rent following eviction of the tenant or loss of rent if the tenant vacates the property without the required notice, you are likely to be covered for this shortfall. As always, if you are unsure, you should check with your insurer.
Q: If my tenant says they can’t afford to pay their rent as they’ve lost their job, will my insurance pay?
No. Insurance cover may be available if your tenant abandons the property without notice or if you have evicted the tenant due to non-payment of rent, but not if the tenant remains living in the home.
If your tenant is having trouble paying rent there is useful information from Tenancy Services on how to help during COVID-19.
Q: My tenant vacated the rental property suddenly – does my policy cover me for loss of rent?
If your policy provides cover for tenants vacating without notice, then you will be covered for the unpaid weekly rent up to a set number of weeks. The number of weeks will vary between policies so check your own policy.
Q: How do I inspect my rental property in a COVID-19 environment?
You should always follow the guidance issued by the government about making safe contact with other people, and inspections should not be undertaken if any restrictions are in place.
Some property managers are completing virtual inspections but contact your insurer to see if a virtual inspection will satisfy their needs before relying on this.
If you are unsure about the requirements under your policy, we recommend you contact your insurer or insurance advisor.
As we move down the alert levels, we recommend you contact your tenant to confirm whether they are self-isolating or are ill. If they are, then the inspection should wait until after the tenant has been cleared by a health professional.
Under Alert Level 1, the expectation is that inspections resume as long as it is safe to do so.
Q: Why are some new landlord policies not providing cover at the moment for a tenant’s failure to pay rent?
If you already had have a landlord policy before Covid-19 lockdown or restrictions applied, then there will be no changes to your cover.
If you didn’t have a landlord policy before the lockdown/restrictions applied but have taken out cover since, or are considering taking out cover now, some companies may not in a COVID-19 environment offer to provide loss of rent or rent default cover to customers who don’t already have it, and some companies may allow customers to select the cover now but will not accept claims for loss of rent where the cause is related in any way to COVID-19 financial hardship, as this is no longer a sudden and unforeseen event.
If you are thinking of taking out cover, shop around and compare policy benefits.
One of the principles of insurance is that a loss must be from a sudden and unforeseen event. In a situation where insurers predict, or it is common knowledge, that there is an expected exposure (rather than unexpected) it is unlikely cover will be provided.
A more extreme example to illustrate the same principle would be trying to take out insurance when part of your house was on fire. The risk is too high, and it is no longer unforeseen.
You can keep up to date with changes that the government makes in relation to rental properties here – Tenancy Services.
