Agents are warning landlords of possible rent losses as tenants default due to COVID-19 job losses. The Government is stepping in with support measures to ensure people can pay rent and other expenses. However, it is worth looking at the loss of rent clauses in Landlord Protection policies and their coverage limits.
General disclaimer: read your policy yourself.
First, check you have loss of rent as part of your cover. In some policies, this is an option.
Second, read the fine print. You may be surprised at the limits. Also, check any general virus or pandemic exclusions under the policy.
Let's take a general look at Terri Sheer and EBM Rent Cover. In general, these policies will not allow a claim where a tenant stays in the property but cannot pay the rent. Court/Tribunal orders are generally needed.
First, Terri Scheer landlord insurance - now a Suncorp product.
In the event that your tenant cannot pay rent because they have lost their job due to COVID-19 closures, can you claim on your insurance?
The section you would most likely rely on is the Loss of Rent - Hardship provision. It provides cover for "Loss of rent if a court awards the tenant a release from their lease obligations, over and above the tenant's bond monies,due to hardship."
Note that, under this provision, the tenant needs a court order releasing them from their lease obligations. Also note the amount of rent covered is four weeks only.
Unless Terri Scheer relaxes the provision, it would be difficult to claim where a tenant stays in the property but can't pay the rent.
Next, EBM Rent Cover - a QBE product.
Default in the payment of rent includes:
- termination on the grounds of hardship which has been authorised by a court or tribunal.
- the tenant vacates your premises without notifying you.
- your premises cannot be occupied due to denial of access caused by the tenant refusing to vacate your premises after a lawful order for eviction or possession has been served upon them.
In the first two circumstances, a maximum of six weeks rent is payable, subject to a maximum of $1,500 per week. In the denial of access example, a maximum of 52 weeks is payable subject to the same per week monetary limit.
Without modification, the policy wouldn't allow a claim where a tenant stays in the property but cannot pay the rent.
Also note the timeframe for an order from QCAT. The timing for a non-urgent tenancy related matter following conciliation is around 20 weeks from lodgement to hearing. An urgent matter should be quicker but it will not happen overnight.
It is not quite the equivalent of hitting a blue elephant on a full moon night before claiming but there are hurdles. Landlords should read their policies carefully and push back on agents who tell them to just claim on their insurance.
Postscript:
I have added a general overview of a few more examples of loss of rent clauses under Landlord Protection insurance.
It is unclear how any proposed freeze on evictions under residential tenancy legislation will impact these provisions. I would expect the various insurance companies to issue updates following any legislative changes.
Suncorp
Suncorp will cover where a tenant ceases paying rent but does not move out. A maximum of 14 weeks is payable where there is a lease agreement with a cap of $5,000. Suncorp, in their worked example, state that they not pay the first four weeks of unpaid rent. Claims are subject to a $500 loss of rent excess. The landlord must take all reasonable steps to remedy the default or evict the tenant. A freeze on evictions may impact this requirement.
https://bit.ly/39oOGFh
Allianz
Allanz covers default in payment by a tenant provided the appropriate notices are issued, capped at 15 weeks and $10,000. If the lease is terminated by a Tribunal on the grounds of tenant hardship, the maximum limit is 6 weeks, subject to the $10,000 cap.
https://bit.ly/3apTcVv
Australian Landlord Insurance
ALI covers default in payment by the tenant or loss of rent due to court or tribunal-ordered termination of the lease due to tenant hardship, capped at 15 weeks or $18,750 and subject to maximum weekly rent of $1,250. There is a requirement to minimise rent loss and issue rent arrears and termination notices and pursue eviction. It is not clear how they would view a tenant remaining in place and not paying rent. Any freeze on evictions may work in the landlord's favour.
https://bit.ly/2UmPo1F
QBE
QBE will cover up to the weekly rent and time limit specified in the policy schedule where a tenant stops paying rent. Landlords are required to take steps to mitigate the loss or evict the tenant. QBE will not cover periods where the tenant is not required to pay rent under the lease, including rent relief granted by the landlord. There is also a limit applying two weeks after a tenant has left after a Notice to Leave is served.
https://qbe.co/2WMQpBK
PELEN
March 2020
© PELEN 2020
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