If you are in the process of converting a building into separate flats, you may want to rent these units out to new tenants. If you've never done this before, there are many different factors to consider, but one of the most important elements is undoubtedly insurance. Apart from the obvious coverage, what kind of protection should you consider to deal with this specific type of venture?
The Nightmare Tenant
While the vast majority of tenants are well behaved and model occupants, this is not always the case. If you're unlucky, you may come across a tenant who causes damage to your property on purpose, and if you're really unlucky, this type of damage could be significant. It's not unheard of for an unruly tenant to break windows, damage appliances, punch holes in drywall or even set a fire. The cost of such damage could be substantial to repair, and it may not always be easy to recover the money from the culprit.
Limited Deposits and Difficult Collections
You may want to charge a deposit before any tenant moves, which is generally a good idea. Still, there's a limit to how much deposit you can realistically charge, and if any damage is significant, it may not cover it in any case. Further, it may take time to get your hands on that deposit money, especially if the tenant decides to appeal. Even if you are able to bring a criminal case against the tenant, there is no guarantee that you'll recoup the money from their assets.
Malicious Damage Protection
As you can see, this can be quite a challenge, but insurance companies do offer a specific type of coverage. Talk with your broker about additional protection related to malicious damage by tenants, either to the building, contents or both. You may have to agree to an excess, and conditions may be applied. For example, you may be required to give each tenant a full reference check before taking them on to see if there is any evidence of previous bad behaviour.
Best Practices
By all means, conduct due diligence and keep in close touch with any tenants during the course of their tenancy. If any problems arise, deal with them promptly and ensure that you inspect your property regularly to make sure that it is still in good condition. Also, prepare a detailed property inventory and make the tenants sign this before moving in. This will make it easier for you to track the condition of your property and make allowances for wear and tear.
Getting Protection
To set the ball in motion, talk with your commercial property insurance broker today.
Share18 March 2022
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