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By Emma Smith

Becoming a property investor can be rewarding and as a landlord you expect some sort of financial return on renting your property. As with any investment there is some degree of risk, which can take a variety of forms. A good way for landlords safeguard against potential loss is to take out Landlord Insurance.

Landlord insurance will protect landlords in the event of:

.  accidental or malicious damage to property,
.  rental loss issues that can arise from tenants defaulting or abandoning your property, and
.  provide legal liability cover

In considering effective Landlord insurance it is advisable to seek cover with a property management specialist. This is the only way to protect you against the laws that govern rented properties being the Residential Tenancies Act 1997. There are certain rights that tenants have and it doesn’t matter  how well your property is being managed there are instances where loss is unavoidable:

  1.  Notice Periods – Did you know that your managing agent cannot serve a Notice to Vacate for rental arrears until the 15th day AFTER rent is due? This gives  the tenant up to 14 days to pay rent before the matter can proceed to VCAT (Victorian Civil and Administrative Tribunal) to commence eviction proceedings.  Once VCAT orders commence you could end up being a month or more in rental arrears and still have no have vacant possession of the property. After this  period of time you will still need to rectify an damages or issues before re-letting the property.
  2.  Property Inspections – In accordance with the Act, you agent cannot conduct a routine inspection on the property until 90 days (3 months) after the tenant has moved  in. This will be the first opportunity you agent has to make sure your property is being properly looked after. After this inspection you can only request an inspection every 6 months. All inspections need to be arranged with fair notice periods to your tenant.
  3.  Tenants and pets – Although you may not have approved a pet to be housed at your property, tenants can and will have pets. This is not something that is  easy to manage and before you know it there is damage to your property that will need to be rectified before you re-let the property, for example, soiled floor  coverings, fleas or damaged doors and frames. This is where point 2 is also effective in making sure a tenants is not in breach of their tenancy agreement by having an unapproved pet.
  4.  Legal responsibility – As a landlord you are legally responsible for providing a safe property for your tenant to reside in. If there are any safety hazards  relating to the building, electrical work, piping or outdoor spaces that result in injury or death to the tenant or any third party in your property you can be held  legally liable – you MUST have legal liability cover in place. The common amount suggested is a cover for the sum of $20 million.
  5.  Periodic tenancies– once you tenant has fulfilled their fixed term lease agreement they can opt to stay on a periodic (month to month) tenancy. You must  ensure that your landlord insurance covers periodic tenancies as some products deem there to be no tenancy in place and will not pay in the event of an  abandonment or eviction.

These are just some of the issues that property investors need to be aware of. The bond can only cover certain items and in some instances is not always awarded in full to the landlord. VCAT has to take into account the circumstances of both parties in handing down outcomes relating to tenancies. In the event your property suffers rent loss and damages, the landlord is most likely to be out of pocket in some way. If you cannot afford these risks, you must take out Landlord cover.

Insurance on the property is the landlord’s responsibility and it’s important to understand the level of cover you need. If your investment property is a house, you need a Building policy AND a Landlord policy. If your investment property is a unit (with an Owners corporation) you only need a Landlord policy as the Building insurance is more often than not covered through the Owners corporation management.

To assess the best value Landlord and Building cover you must consider the terms of insurance. The best value cover will deliver the longest period of cover for rent loss, provide high cover to contents items and include pet damage. Building cover should provide you with additional benefits that will support any repairs that need to occur at your property.
You must also consider the claims excess. Some insurers will offer good length of cover however the excesses applied will negate your ability to claim on smaller damages. All these items are crucial in lowering your financial risk.

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