Death and taxes are among life’s certainties but while landlords are generally well-informed on the tax implications of their investments, few consider the impact the death of a tenant can have.
Blogger: Sharon Fox-Slater, general manager at RentCover
If a tenant dies, the owner can be left tens of thousands of dollars out of pocket so it is important to act with compassion and sensitivity while minimising the financial fall-out.
The financial costs vary. There can be direct costs, in terms of lost rent and clean-ups, and indirect costs if a property is slower to re-lease because of the associated stigma. Most landlord insurance provides some cover if a tenant dies, although the extent varies depending on the insurer.
Let’s look at some recent claims EBM Insurance Brokers’ RentCover has paid out:
- A murder-suicide in a Melbourne investment property led to a $77,000 payout – $50,000 to repair damage and almost $22,000 to cover lost rent over a 10-month period. The property required new carpet throughout, new tiles and repainting.
- A tenant who passed away in Perth led to a $17,000 loss of rent claim over an 11 month period because the property manager had difficulty tracking down the next of kin to dispose of the tenant’s goods.
- A Melbourne tenant who committed suicide had no known next of kin meaning the State Trustee became responsible. This resulted in a payout for lost rent of $11,000, including a lengthy period in which the owners had no access to the property because the tenant’s possessions hadn’t been auctioned off.
If a tenant lives alone, the landlord or property manager is sometimes the one who discovers the body when investigating why rent is not being paid. It’s unfortunate but it happens more frequently than most people would expect.
Dealing with a family that is grieving can make negotiations around clearing out possessions quite difficult. However, many property investors aren’t in a position where they can afford to lose money indefinitely.
It’s a good idea to check the landlord insurance policy to see whether the death of a tenant and associated costs were covered and, if so, for what period. (EBM’s RentCover takes care of up to 52 weeks of lost rent. Once the property is fit to be rented out, the policy covers up to six weeks of vacancy while you’re looking for a new tenant.)
If landlords are uninsured, they can make a claim against the late tenant’s estate, but the process is often time-consuming and challenging.
If a tenant dies:
- Be tactful, sensitive and compassionate in all dealings with the tenant’s family and friends.
- Keep the landlord informed at all points in the process.
- Contact the next of kin and pay your respects.
- Ask the next of kin who they would like you to deal with regarding the property.
- Contact your insurer to ask about your cover and what paperwork is required to claim, for example a death certificate or published funeral notice.
- If police are involved, liaise with the officer in charge of the investigation as to when access can be expected.
About Sharon Fox-Slater
Sharon Fox-Slater is the general manager of RentCover, a division of EBM Insurance Brokers, which insures 120,000 investment properties around Australia. With 20 years’ experience in landlord insurance, Sharon’s top priority is customer service and positive customer comments are her biggest marker of success. Despite leaving school at 15, Sharon has forged a ground-breaking career – she was the first woman to become a fellow of the National Insurance Brokers Association. Sharon was recently honoured to have been included in Insurance Business magazine’s Elite Brokers 2013 list.
ABOUT THE AUTHOR
Sharon Fox-Slater is the Managing Director of EBM RentCover, which protects more than 150,000 rental properties across Australia. She commenced a role with EBM back in 1993 and was part of the core team that helped launch one of Australia’s first landlord insurance policies into the market. She was also the first woman in Australia to complete the Advanced Diploma in Insurance Broking, and is well equipped to educate property investors and property professionals about the value of aligning with a specialist landlord insurance provider.