“I’m Afraid Your Tenant Has Died…”

Photo: gfpeck, Creative Commons

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.

Photo: Matt Kingston, Creative Commons

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.