After looking through our options it seems that the condo insurance covers part of the damage and our landlord’s insurance covers much of the rest. What’s not covered? The tenant’s personal property and the cost of their alternative living while we made it livable again (7 days or so). Why is it not covered? We had a standard lease that leave it up to the tenant’s rental insurance. The tenant has no renter’s insurance. They have no legal recourse and they know it.
So when it came time to discuss what to do, we gave them a couple of options. We happened to find a cheaper place that they could move into while we remodel. We’d simply all agree to break the lease and keep the relationship cordial, so that they may come back when renovations are complete. Alternatively, we could let them live there during the renovations (it will still be livable).
My friend who is a real estate lawyer in MA, said the best idea would try to get them to break the lease give them back some money for damages and try to rent out a fixed up place in September. That sounds like a lot of loss on our side (months without rent, giving them money for their lack of insurance) that we shouldn’t have to take in my opinion. His thought was that it’s probably worth it to resolve the situation and move on. I didn’t really buy it because when you barely break even on the rent, it’s painful to go into the negatives. (Regular long-time readers may know that we intended for these to be our primary residence long ago, but we met each other, found much better job opportunities. Breaking even is much better than a big loss in the current market.)
The resolution seemed pretty simple. We went through the section of the lease (fire and causality) with the tenant and outlined the responsibilities of each party. We showed how we were doing our part, but that their part was going to have to be to take care of their possessions as outlined. They saw it our way. They didn’t want to go through the hassle of moving (who can blame them?) and said that they’d stay through the renovations. They even offered to help let in the contractor for the renovations. They did request asked for July’s rent back and we decided it was probably worth that to move on. It seems reasonable to me that they should get something back for not having the place they were expecting and having gone through this inconvenience as well. Maybe we are just a little too nice.
What would you have done?
Photo Credit: Todd Quinn
Wow. After all my condo problems the past few years, I told my renter she had to have it before moving in. Luckily she had worked for an insurance company before so she didn’t think my request was a big deal.
Did you advise your tenant to get it when they moved in?
Nope, my wife and I both assumed that it was common sense. In the future we will advise our tenants to get it. We may even require it, if it’s legal to do so in MA.
The minute I moved into my first apartment I made sure I had renter’s insurance. It’s easy to transfer between apartments, I just call my agent and they switch it to my new apartment. It is beyond me why all renters do not get rental insurance. Many of my friends and even my roommates do not have insurance. (I’m pretty sure that my insurance won’t cover their property either.)
I live in NYC and my renter’s insurance with State Farm costs about $180 per year…that’s $15 a month! For that I have coverage of about $35,000 with a $500 deductable. (This is all off the top of my head.) While my possessions aren’t worth very much, replacing them all out of pocket would be horrid. $15 a month is worth the peace of mind.
I’m not sure that it’s legal to REQUIRE rental insurance as a condition of a lease. You may want to double check that with your real estate guy before adding it to a lease. After all you, the landlord, does not have an “insurance interest” in the renter’s personal property.
As for the loss of use … hmm. Does the lease specifically address this? It seems that the landlord would have some sort of duty to provide living quarters comparable to the original property.
It is definitely a good idea for people to have renter’s insurance, though. As CentsInTheCity mentioned, it’s really not terribly expensive and can save a huge headache down the road. It’s surprising how much your possessions are worth, when you start adding up every t-shirt and screwdriver.
Cents – your policy definitely doesn’t cover the possessions of your roommates.
The last two leases (the only two) I signed in CA, proof of renter’s insurance was required. So at least in one state – and a kooky one at that as we’ll find out with tomorrow’s article – does make it legal to have as a requirement.
Our loss of use said that my wife had to provide an option of suitable housing, by finding the other apartment, we’ve covered that. However, I think that when there’s no negligence on the landlord’s part it defaults to renter’s insurance for the temp housing (probably a limit of a week or something). It seems like it would be fair too, because the renter checked into a hotel that we didn’t approve and were difficult to reach for a week. What if they checked into a $500 a night suite? Should we be on the hook for a week that would add up to more than 3 months of their rent?
It sounds like it could be a situation like substitute transportation in a car accident, but they didn’t really pursue our insurance company for that.
Don’t take my word for how insurance should work out in this case, it’s just how we have it worked out.
Sounds like you made the best of a bad situation, LM. It could have ended up a lot worse.
Lazy – just because it was in those leases doesn’t necessarily mean that it’s legal ;)
It would seem that forcing the tenant to purchase a product that you (landlord) have no insurable interest in would fly in the face of some of the equal housing laws. When I was a renter (3 apartments in 2 states) I never had a landlord even mention it (and, in fact, I did not have coverage in my first apartment). The legality may vary by state.
If it’s not legal, then I would quite enjoy hitting up my last landlord with a law suit – one of the biggest real estate groups in CA (and maybe outside of CA as well). However, you won’t know why until you read tomorrow’s article.
I figure the legality does vary by state, which is why I suggested I might require it if it’s legal in MA to do so.
I think dealing with tax and legal issues state to state is one of the biggest headaches for both rental properties and small business.
Glad you got things worked out reasonably well.
The first month I had my house rented, the HVAC went completely out. Talk about a tough month to become a landlord.
I had a similar, though not quite as bad, issue with my last place. The master bathroom became infected with toxic black mold and had to be completely ripped out and redone. A contractor cited the landlord since the previous owner had not used backerboard when installing the shower and that had allowed the mold to build up.
The place was uninhabitable for a week since we had no backup shower. The landlord reimbursed me for 1 week of rent and apologized. There was no personal property damage, but that is clearly covered by renter’s insurance anyway (which I do have.)
All CA leases I have signed require proof of renter’s insurance, so that’s definitely a legal clause here. My last landlord did ask me to print it and kept it on file. Current landlord has not asked for it, though the lease states it as a requirement.
-Erica
I probably would have done the same thing with my tenant.
I did make it clear to her that if something were to happen with her personal property, I would not be responsible for it.
I also have a clause in my lease that if something catastrophic was to happen to the property, she could break the lease without penalty.
Do you have a landlord’s insurance policy? Mine pays for lost rent when something like that happens.
Erica: Hmm, toxic black mold does sound pretty bad.
SingleGuyMoney: We do have a landlord’s insurance policy, which is picking up the tab of other things. We have to look into whether it picks up the tab for the tenant’s stay. While I thought it might (like car insurance picking up substitute transportation), my wife seems to say it doesn’t.
In the confusion it’s possible I have that information wrong. It’s been doubly hard with here away on business last week and time zones of calling Boston from California during business hours.
I would have had a better insurance policy. :/ You always have to read the fine print.
So nice… although I probably would have done the same thing. I don’t know how much a month’s rent is, but rental insurance is so cheap that it might have been better just to buy it for them! :( It might be good to have them sign something so that they don’t just bail after a free month of rent in July, and also release you of all liability of… whatever.
I’ve never seen rental insurance as a requirement on any of my leases.
I would think that “loss of income” would be included in the policy. I’d be a little surprised if it wasn’t.
Having said that, there may be a deductible for that coverage, and the 7 days of being uninhabitable might not hit the deductible.
It’s definitely worth a quick call to your agent (or claim rep), though.
I would have done the same thing.
Their lack of insurance is no problem of yours.
To expect a normal months rent for a place that is no longer normal (and significantly so) would be unfair.
Good call.
And to Cents – your tenants insurance will most definitely not cover property that is not yours.
I doubled checked this. Under the VRLTA in Virginia, a landlord can require renter’s insurance and proof of it before a tenant moves in. They can actually also charge for getting commercial insurance extra, but it cannot be part of the tenant’s security deposit.
So I think, like all rental laws, it’s highly local what you can and cannot require when it comes to renter’s insurance. It wasn’t required when I lived in San Francisco, DC or Baltimore. But I’ve got a good story on my blog about about losing everything in fire and having renter’s ins cover it. (Happened to a co-worker of mine on St. Patrick’s Day.)
I think you did the right thing. Your situation is exactly why I’ve never got into the whole “landlord” thing, especially from afar.
Have you considered a management company? For around 8 percent of the rent, they take some of the headache out of bad situations. Plus, they may cover some of the loss, too.
well resolved
My appartment was recently flooded. I had to sleep in standing water for a week while my landlord was telling me that it was rain pooring out of the window!I could not even breathe normal and it is dangerous for the health. I called the lawyer, he said that I can easily apply for the court, but this court can last forever. I had to just move. I was living alone,so I didnt ask who to help with moving. Thank got, I moved out from that place and relocated to a normal one….without water