“I’m Afraid Your Tenant Has Died…”

By Sharon Fox-Slater on 20 Aug 2014
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Death and taxes are among life’s certainties.

While landlords are generally well-informed on the tax implications of their investments, few consider the potential impact of a tenant passing away.

When the worst happens, it is important to act with compassion and sensitivity while also minimising the financial fall-out – which can run to tens of thousands of dollars.

The dollar costs vary depending on the situation. Direct costs include lost rent and clean-ups. Indirect costs can occur if a property is slower to re-lease because of the associated stigma.

“Be tactful, sensitive and compassionate in all dealings with the tenant’s family and friends.”

Most landlord insurance provides some cover if a tenant dies, although the extent varies depending on your insurer.

Last year, for example, EBM Insurance Brokers’ RentCover division paid a claim for $50,000 to repair damage to a property where a tenant murdered his wife then committed suicide – and a further payment of almost $22,000 to cover lost rent over a 10-month period. The property required new carpet throughout, new tiles and repainting.

Other Claims We’ve Paid Recently Have Included:

• Almost $17,000 for rent lost over an 11-month period after a tenant passed away leaving the agent with a difficult job tracking down the next of kin to dispose of the tenant’s goods.

• A case in which a tenant who committed suicide had no known next of kin – meaning the State Trustee became responsible. Landlords were prevented from accessing their premises until the person’s possessions were auctioned and the funeral held. The total payout for lost rent was $11,000 – more than half of it for a time period in which the owners had no access to the property.

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.

“Indirect costs can occur if a property is slower to re-lease because of the associated stigma.”

Dealing with a family that is grieving can make negotiations around issues like clearing out possessions quite difficult. However, many property investors aren’t in a position where they can afford to lose money indefinitely.

It’s worth checking the coverage in the landlord insurance policy to see whether the death of a tenant and associated costs are covered and, if so, for what period.

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.

• 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 make a 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.

• Organise a meeting with the person nominated by the next of kin about plans for vacating the property. Approach the conversation tactfully.

• Offer the person contacts for firms who might be able to help pack, sort and store possessions until the family is ready to deal with them.

• Be sensitive about the timing of any open for inspections or other contact – being mindful of events such as the funeral.

• When the property is vacated, clean it, using specialist assistance if necessary, and re-advertise it for lease.

• Keep all receipts and records to assist in your landlord insurance claim.

About the Author

Sharon Fox-Slater is the Executive 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.

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