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Landlord Insurance - home office makes it invalid

Discussion in 'Property Management' started by Ms Reno, 5th Feb, 2016.

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  1. Ms Reno

    Ms Reno Member

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    Hi again,

    I have just advertised my first rental property, and bought LL/Building Ins with TS. When speaking with TS on phone I asked about home office run by tenant and she said that if any business is conducted on property (including home office) then my policy is "invalid - insure with someone else". I asked, "how do I know if they are?", tenants might just decide to start up an online ebay trading without advising REA/LL, me.

    Our first open house inspection is tomorrow and I know 1 applicant runs a home business. How do I ensure my asset is protected? Any advice? How can I stop them doing it? If they do it and TS refuses my claim, I don't want to have to chase a tenant for potentially $350k if there is a fire because of this.

    Is there a general clause in NSW Lease to restrict 'activity' - I feel like this is such a huge risk when a tenant can just do what they like, leaving me completely vulnerable.

    Can TS just go, nup, runs a home office, that full loss fire claim, we are not paying.

    Thx
     
  2. Xenia

    Xenia Adelaide Property Manager Business Member

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    Is it the building or landlords insurance that is void?
     
  3. Ozzie in Texas

    Ozzie in Texas Well-Known Member

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    Alternatively, you can demand that a tenant with a home based business is subject to your approval and provision of proof of appropriate public liability insurance.
     
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  4. Marg4000

    Marg4000 Well-Known Member

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    We have refused to rent to tenants who want to run a home business. As said, there can be insurance issues.
    Marg
     
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  5. Chilliblue

    Chilliblue Well-Known Member

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    How can you physically stop a home business if you have no idea about it. Plenty of businesses can be run from a laptop or smartphone
     
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  6. dabbler

    dabbler Well-Known Member

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    I can tell you these things.........

    Insurers look for ways out of claims, if you do not comply with conditions........

    Insurance PDS can be poorly worded, so write to them with any concerns and get it in writing.

    Insurer has told you no home business, you have spoken to them and you know there is a business, they likely record what you have discussed on your file, you have no leg to stand on now if something happens as they will look.

    What can you do ? Inform the agent and tenant that no home business can be run, ask if they are paying tax on a legit business with ABN etc etc.
     
  7. wylie

    wylie Moderator Staff Member

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    We've had situations where tenants have run business from our IPs. Insurance was okay (checked with company at the time) as long as the business didn't involve people calling to the house.

    One tenant was refilling gas bottles under a timber house and that was completely knocked back, so he moved to other premises... probably to another residential house and didn't tell the landlord what his business was :rolleyes:.

    In cases where there was a need for people to enter the house (one lady held art lessons), then we had to get a copy of her public liability policy.

    I would ask your insurer once more and be very clear about what sort of business it is, whether clients will be coming to the premises and whether they will insure you if the tenant has an appropriate policy.

    Of course, that doesn't mean the tenant cannot cancel the policy. There is some risk in that scenario, but as you say, many tenants would be running businesses without the knowledge of either the owner or a PM.

    If you get an answer that means you can go ahead with this applicant, I would be asking for the decision from the insurer it in writing. Of course, all calls are recorded, but what if that recording is somehow lost?
     
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  8. dabbler

    dabbler Well-Known Member

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    Better not to know some things maybe, just make sure inspections are done.

    I would just about guarantee it would be "lost" if was something not working to their favor...... it is for "quality and training"....no requirement for them to keep to produce in court to aid your defence/evidence etc
     
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  9. brettc

    brettc Well-Known Member Business Plus Member

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    This seems like a really tough exclusion, particularly if they are excluding something as simple as a "home office". I'm not here to advertise however I can safely say that our RentCover policies have a very different interpretation and other Insurers are likely to as well, but you would need to check.

    Under RentCover policies we have no problem insuring properties that include a home office or a small home business, providing the primary use of the property is residential. This doesn't insure the business as such but the building, contents and loss of rent are not an issue.

    Let me know if you have any questions.
     
  10. Ms Reno

    Ms Reno Member

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    Thank you all for your advice... I read the PDS and all I could find was this within the building insurance PDS:

    General exclusions

    Buildings we do not cover

    We do not insure you if your building is:

    • ✘ Used for business or trade, except for dwellings used principally as a place of residence that also contains an office or surgery, or

      *** This actually goes against what she said on the phone! Oh gosh, I might wait to see what application we get (if any!). I will discuss with REA their interpretation and maybe add a clause within the lease and push back responsibility back to tenant, should anyone simply decide they will start doing it, without my knowledge.

      I appreciate all the feedback, I thought I was over thinking... but I'm happy to know some of you have experienced this situation... I am brand new to IP.
    I actually asked TS on phone "what if I don't know about it?" - she replied, what you don't know, you don't know, then rushed to get off the phone before I could detail if it were LL insurance or Building!

    Didn't see any exclusion within PDS on LL policy - I am within 30 day cooling off period so any issues, I can cancel, get refund and go with Rentcover! Actually... I tried the 'SS' code to get the discount on EBM website but it didn't work, thats why I went with TS!

    Interetsed is acyone exact wording for their additional NSW Leases clause re: 'no business to be conducted within or from property' - or Xenia, appreciate your advice here :)

    When I discussed with TS on phone, it was not specific, just a clearing up of exclusions, generally. I said we were having our first open house later that week and wanted to make sure I was instructing REA correctly.
     
    Last edited: 8th Feb, 2016
  11. dabbler

    dabbler Well-Known Member

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    Hi Ms Reno....

    You cannot over think things where you may be left with a total loss and a void policy....IMO....anyway

    I have had a number of things on various insurers where I have questioned them, and I have different responses by the CSR on the phone, so I have written to the relevant area with the question so I have a written response.
     
  12. wylie

    wylie Moderator Staff Member

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    I would doubt any clause about not running a business in the lease will cut the mustard if it comes to a claim. I think this is a big risk we all take, that in a way is unavoidable.
     
  13. Ms Reno

    Ms Reno Member

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    Update: Received application from the self employed family. I have asked REA to clarify what activities they propose to conduct on my IP in regards to self employment. Already I am pretty sure it is home office and storing their product in my sheds (landscaping). Anyone see any issue with this...? Obviously they need to insure their own property (contents). I would think a pretty common occurrence.
    The PDS on TS Building insurance does cover home office - see my quote above.

    o boy.
     
  14. dabbler

    dabbler Well-Known Member

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    Will depend on your insurer, if they are just using shed for some stock and tools and doing related bookwork in home, that is not like running a business, such as car repairer, or LPG per other post, at the premises.

    I think any objection would have to be the actual carrying on of a business *at* the premises. Like carrying on of something that requires council approval may be a flag.

    Once you know all the details, ask your insurer if you have doubts
     
  15. Hosko

    Hosko Active Member

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    I'm with you on this Brett. Sounds like a very tough exclusion that most insurers would have minimal problem with if it is a home office with very minimal physical customer interaction on site. Of course, to reiterate the Building and LL component would not pick up cover for the business
     
  16. Magnet

    Magnet Well-Known Member

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    It would be a big stretch for an insurance company to say a landscaper works at home. They would store tools and equipment and do their BAS at home if they don't employ a bookkeeper. They are highly unlikely to have customers or other work related people visiting their home.
     
  17. D.T.

    D.T. Adelaide Property Manager Business Member

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    With that level of customer service I'd be inclined to not go with them regardless.
     
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  18. brettc

    brettc Well-Known Member Business Plus Member

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    I'm not sure what you mean buy "it didn't work". The "Somersoft" or "PropertyChat" code provides a discount for the first 12 months equivalent to 60 days cover, which is not reflected in the online application but will be given when you receive your invoice. Effectively the invoice will arrive discounted.

    In saying that, you should never go with any particular cover purely on price, it's always a consideration, but you are far better to pay a little more and get the right cover and the right ongoing experience (in particular claims). That's why people will generally insure with RentCover, the discount is simply a bonus.
     
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