Landlords Beware – Are you protected?
As a landlord, it’s your responsibility to keep your properties safe. But what if you overlook a loose railing and a tenant’s family member falls down the stairs? What if a visitor falls on the sidewalk leading to your building? Or what if a delivery person is bitten by a tenant’s dog? Accidents happen, and in each of these cases, it could be determined that you are partially or fully responsible for injuries.
Now, if you’re like most rental property owners, you probably have landlord liability insurance. Unfortunately, that will only take you so far. You also need to know what your landlord policy covers and whether you’ve fully covered your risk exposure.
Your Properties and Assets are at Risk
If you own your property personally or with a partner, your personal assets are at risk. That means your savings, your equity in a business or other property, even a portion of your future earnings can be taken to pay legal claims related to your property. And, if you have a partner, your personal assets are at risk for the entire amount of the claim – regardless of your partnership “percentage.” Insurance is essential, but may not be enough. For example, a lawsuit could result in an award that exceeds the dollar limit of your policy leaving your personal assets exposed to the uncovered portion of the award. If you’d like to limit the risks of rental properties, talk to your attorney about forming a limited liability company (LLC), corporation or other limited liability entity to hold your property. And the good news is that the cost of doing so is usually nominal, especially when you consider with the risk of personal ownership.
Barry Gartenberg, an experienced business and property attorney tells clients, “Holding property as a sole proprietor or in a general partnership is like ‘tap dancing in a minefield!’ It’s only a matter of time before you misstep.”
Your Tenants’ Actions (or Inactions) Can Expose You to Lawsuits
Consider this: Your tenant fails to alert you about a loose window screen in their apartment. On a windy day, the screen detaches and injures a neighbor walking by. After the incident, that neighbor sues you and the tenant. Unfortunately, they have a solid case against you even though you had no idea the screen had loosened. Or, how about this? A tenant leaves a rake out in the front yard causing someone to trip and injure themselves. Even though you, the landlord, had nothing to do with it, you can be liable. And regardless if your tenant has tenants liability insurance or you have landlord protection insurance, you could both be in for a messy legal battle.
According to business and property attorney Barry Gartenberg,“The line between landlord liability and tenant liability is not always clear. Victims will generally sue everybody. Ultimately, liability will be determined and allocated through the course of the lawsuit and trial. The process can result in significant legal fees. So, it is important for a landlord to have appropriate coverage for legal defense costs as well as liability.”
That’s Right…You Can Demand Tenant Insurance
While many people assume the landlord’s policy covers personal losses, that’s typically not the case and this should be spelled out in the lease. Generally, only the physical building is covered by landlords building insurance. And since burglary, theft and vandalism can occur at any moment at a rental property, tenant insurance can save a lifetime of valuables. Why lose a good tenant because they had to replace their stuff and can longer afford rent? Or worse yet, why run the risk of wasting time in small claims court when they try to recoup their losses? Tenant insurance is really a win-win.
Barry Gartenberg says, “Landlords and tenants have great flexibility in deciding how to limit and allocate the risks associated with tenancies as well as determining who will bear the cost of insuring such risks. For example, a landlord can require a tenant to secure and maintain various types of insurance coverage; a landlord can require that the tenant’s policy cover the landlord (e.g., as “an additional insured”); and a landlord and tenant can facilitate the coordination of coverage between their respective insurers. A well-prepared lease agreement and appropriate insurance coverage are essential to achieving the risk management goals of the landlord and tenant.”
Talk to Your Insurance Agent
Being a landlord has its risks and rewards. While you may think you’re fully protected by merely purchasing a landlord liability insurance policy, it simply may not be enough. Talk to your insurance agent about the options available to limit the risks of your rental properties. They can help you find the right level of protection at the best possible price.
What does your Landlord Insurance Policy include?
