Do periodic leases void landlord / building insurance

hi

With a tenant moving out I'm looking to readvertise my rental property as a month to month lease or best case 6 month lease. (We are looking at knocking down and developing within 5-6 months)

My property manager has stated that a lot of 6 month leases are not covered by landlord / building insurance as they require a fixed 12 month tenancy agreement??? Is this true, I've not heard of this...

 

The best way to answer this would be to read your pds to see what your insurers stance is, but here are my thoughts :

- Highly doubt 6mths would be different than 12.

- The specialist insurers do cover periodic.

- Insurance products that come from banks and supermarkets probably dont.

- why does it matter if you're going to demolish anyway?

- finding a tenant who only wants 6mths might be tricky

 

Your PM is incorrect, otherwise lots of Victorian landlords wouldn’t be covered when tenants choose to go to a default monthly tenancy at the end of a lease.

However, rental income will usually only be compensated according to the lease (or default monthly 'lease' ) duration - so the longer the lease the longer the potential compensation for lost rent if the tenant skips out etc.

My non specialist insurance still covers the property whatever the lease length and also if the tenant goes to a monthly tenancy without resigning a lease.

Have a look at your PDS.

 

Would only void a rubbish quality policy which is fit to use only as toilet paper

Any insurer requiring a fixed term lease in order for cover to be provided should be replaced

 

What justifiable reason would an insurer have for requiring a fixed term lease on place rather than holdover? The legislation makes it quite clear that holding over is on the same t & c's as the lease.

 

None really yet some will not cover a tenant on periodic leases even though the tenants have the right to be in one

 

Read your insurance Product Disclosure Statement.

 

Was going to ask this very question. So, am going to read the PDS now - I was not aware of the particular problem with no cover if tenancy is on period - and fixed term is required for landlord insurance. Does anyone know if EBM policy have this requirements? - all our IPs are with EBM. Does TS have this requirement?

 

I have NEVER seen an insurer with a rubbish policy statement like that, happy to be proven wrong if it exists though.

EBM and TS do not have that requirement.

 

The reason I asked was because we were given mis-information from the PM. Current tenants signed a 12 mos lease and it is due to expire. PM wanted tenants to sign a renewal for another 12 mos, but tenants claimed they could not do it on time because they were away etc. PM said to tenants that landlords might be at risk on periodic lease. It was strange to hear this as we were not aware of this. We actually wrote to EBM to seek clarification and are satisfied that periodic lease (or month to month tenancy) does not expose us to risk (only payout of rent if tenants absconded - for fixed lease, it is for the remaining of the lease, for period lease it is till the end of that period lease). We know that periodic leases can be a pain when tenants only require to give shorter notice to vacate. However, our past experience has been it does not matter how long or short the tenants give notice to vacate, PM always claim either tenants refuse to allow access for open house viewings or they are not allowed to show potential tenants the property until after current tenants move out. Double edged swords for us as landlords

 

Get a new PM.

We always show apartment to prospective tenants while existing tenants are still in the apartment when the lease is coming due.

We let them know in writing 33 days before the end of the lease the specific dates and times we will be showing the apartment in their notice to vacate letter if they haven't renewed their annual lease in time.

eg
- Right_of_entry
To show a prospective tenant (only permitted in the last 14 days before the existing tenancy is due to end) Reasonable notice on each occasion.

 

Agreed. Your PM is incompetent. They have given you completely incorrect information regarding the insurance policy AND failing to follow a best practice procedure to minimize your loss on changeover of tenants. I've never had a problem getting viewings prior to a tenant vacating, respect tenants throughout the tenancy and they are more than happy to help.
If I ever had a problem, they'd be well aware that failing to provide access will result in breach notices and a bad rental reference- not something people want when they're about to move.

 

As you've since found out periodic tenancies, or "tenancies at will which immediately follow a lease", are certainly still covered under RentCover policies. There are though, as has been mentioned, some major insurers who according to their wordings do not cover unless the tenant is on a fixed term lease. That is at least there was, I haven't looked at them closely for this in recent times so you'd need to check your PDS.

 

A point for clarification. For fixed lease - there may probably still be a limit in the number of weeks that insurance would cover. ie. unlikely to pay for remaining 6 months of a 12 month lease unless there is something else holding up having a rentable property.

 

Sounds like your PM cannot be bothered with the effort of making an agreed timeslot with the tenants for viewings (and probably doesn't properly know the tenancy laws permitting access for this).

Lack of knowledge can be forgiven if they swiftly upskill when they realize the knowledge deficit, but laziness is a trait that cannot be fixed. Time for a new PM.