Sunnyvale, CA · Member since 2014 · 15 posts · 1 vote
I am a novice real estate investor. 4 months ago I bought my first property in Indianapolis with tenants in place. The property managed by PM company. The lease agreement required a tenant to buy renters insurance. They have never did it. Each time when I contacted PM about this matter I received a reply saying that they push tenants to get it taken care of, but nothing happened. Today PM told me that the only option is to send a perform or quit letter threatening eviction if not completed by a certain date.
Obviously I don't like the fact that they violate the terms of the lease contract and it makes me wonder what other points of the contract they violate.
Should I pursue compliance? What options do I have?
Correct, every renters policy has liability coverage, most at least $100,000. Our office actually can work with investors or property managers to put together what I would call "forced-place renters insurance." Much like if you have a mortgage on a home the mortgage company will place homeowners coverage covering their interest in the home, you can purchase renters insurance on their behalf. Usually about $10-15 per month (paid on a monthly basis), and you just tack that onto their rent payment. So if rent is $600 a month, they owe $615. If they don't like the extra $15, tell them to send you a copy of their renters policy to get into compliance with their lease agreement.
Tenants insurance covers only the tenants belongings (furniture, personal effects, etc).
If they choose not to purchase insurance, then they are assuming the risk, not you.
You should be carrying building and chattel, flood, fire, and liability insurance.
If your tenant is paying rent on time and keeping your place in good condition, why would you evict?
What about in a snow or ice situation. If a tenant falls, don't they have to run the claim through their insurance first then yours? As a landlord to use the renters insurance as an extra liability to cover themselves. I am not sure so I am asking. Also if there was extreme damage caused by the tenant and they were charged much more than their security deposit due to the damage isn't that what the renters insurance is for as well? Again I am asking because I don't know but assumed this was covered in there.
I always advise my tenants to get renters insurance but I build into the lease that if they do not get the insurance, they are liable for the damage to their belongings and I have them sign that they understand these terms. Other than that I really don't care if they get it or not. I have my insurance so that's all that matters to me.
the tenant has to learn somehow that renter insurance is inexpensive - like between $100 to $250 a year depending on the insurer and policy details.
One approach you can take at lease renewal is to have a tiered approach to the rent. Renewal by the tenant with proof of renter insurance and you offer a smaller rent to the tenant than the rent would be for renewal without the renter insurance; if you make it an extra $25 (or more) per month and they see they can get a policy for less than that, you would hope that would persuade them to get the policy.
Somebody else claimed that they pay for the tenant's renter insurance just to be certain they have it; I can't speak to whether that is feasible or not. Perhaps that is set up as a sort of rebate in the rent.
If they won't get it, there's not that much you can do. I wouldn't make a stink about it myself, some people are just oblivious, like people who refuse to get health insurance. If there is a problem in the future where they would have had a claim, then it certainly shouldn't come back on you in any way- you warned them. Although it might be better to have it strongly recommended, rather than required, in the lease.
I have seen occasions where having renter's insurance actually SAVED tenants quite a bit of money because it qualified them for a multi-policy discount from their carrier on their car insurance. Try telling them that. But they probably won't listen
My lease advises the tenants that my insurance covers my property, not theirs. The lease suggests they get renters insurance...but it isn't mandatory. It isn't my concern if their personal belongings are insured.
Investors, ask your insurance company about willful damage to the property by the tenant. Mine will not cover willful damage. They recommend the tenant has tenant insurance so that if they willfully damage the property then you can go after their insurance company. I'm not making this up.
Dawn Brenengen pointed out the following. Renters insurance also covers damage to the property due to the tenant's actions. I just had one tenant's policy pay out when they had a cooking accident. They paid for a new glass top for the stove, repair to the counter tops and replacement of ALL of the hardwoods on the first floor. Total was about $12,000. So, yes, it's a great idea to require for situations like this one, not just for the tenants' personal belongings.
Correct, every renters policy has liability coverage, most at least $100,000. Our office actually can work with investors or property managers to put together what I would call "forced-place renters insurance." Much like if you have a mortgage on a home the mortgage company will place homeowners coverage covering their interest in the home, you can purchase renters insurance on their behalf. Usually about $10-15 per month (paid on a monthly basis), and you just tack that onto their rent payment. So if rent is $600 a month, they owe $615. If they don't like the extra $15, tell them to send you a copy of their renters policy to get into compliance with their lease agreement.
Thank you very much everybody for replying. I know that the renters insurance has been discussed several times here on the forum. My original question is not about whether I should or should not require tenants to get renters insurance. It is required, it is part of the lease and the tenants put their signatures under it. My question is more about compliance. Obviously the tenants violate the lease agreement. Is it valuation serious enough to push for compliance and threat them with eviction? Or it is not a big deal and I should forget about that? Your opinions are greatly appreciated.
Renter's insurance only covers personal (i.e. tenant) assets. Legally, you cannot force a tenant to purchase such coverage. Sure, your PM can include it in the contract and state that it is mandatory, but that does not mean it holds any legal weight.
Sure recommend the coverage for assurance since it is very inexpensive and provides great piece of mind, but check into the legality of enforcing such expense. Yes, you own the property, yet you have to follow laws AND just because someone signs something does not necessary make it legal within the law. Ask anyone who has legal knowledge. :)
BTW, how does a lack of renter's insurance affect you or your investment? I'm a bit dumbfounded.
I did some further research into renter's insurance after reading this thread and found that it not only covers the renter's personal property, but also liability for things caused by the renter including medical bills I other damages. It also pays for living expenses when the renter doesn't have a place to stay due to fire or other disaster.
Maybe you can have a clause in the contract that states that renter's insurance is required and if proof isn't presented within X days, addition monthly fee of X will apply for it to be purchased by the landlord for the tenant. I don't know the legality of it but I am going to look into this further for my own use. It could save my insurance company from a claim caused by a tenant.
As Victor said, renters insurance is for the tenant, so in the end, if they don't get it, all it means is they are leaving themselves at risk, not you.
Although you should still strongly recommend they get renters insurance because it's cheap and if they do get robbed or something like that, they might not be able to pay the rent.
To directly answer your question. In my opinion, no, if they are paying the rent and not complaining about everything underneath the sun then let it ride. As long as the property is insured then you should not worry about it. I have tenants that violate the lease all the time. If I got rid of all of them for small things it would cost me more then it would be worth. Both money and time.
What I would do is just to make sure that all my bases are covered. I would have the PM write a letter to the tenant letting them know that renters insurance is required per the lease. Include a copy of the lease with the section highlighted. Do not make the letter threatening any eviction, just a polite but stern reminder. Then should something happen you can say that you attempted to inform the tenant to get renters insurance.
Now if the tenant is a dead beat or should become a dead beat, then yes, evict them. Remember you can use it against the tenant should they try to pull any stunts. Call your you ace in the hole.
Ever hear of something called subrogation? How about the payment for temporary housing in the event of a peril occurring, how will the tenant pay for that?
not sure why its part of the lease, there is no benefit to you. at most it should be just a suggestion. I personally wouldnt want renters insurance if I was a renter, i understand they are supposed to because of your lease.
In allot of cases insurance is simply a waste of money, If your renter is wise with how money works and doesn't have much value in his personal possessions then self insuring/no renters insurance would make the most sense. Kinda like when your at home depot and they ask you if you want to pay 20% more for the extended warranty on that $50 item..... just like anything there is a cost/benefit analysis, just because they are renters doesn't mean they are unwise with money.
This is a very small issue for you to be wasting time worrying over, there will be larger issues in the future where you only wish your only problem was that your tenants have no renters insurance. Don't stir a pot that doesn't need stirring.
If you decide to evict, then just remember the cost to make rent ready (turn), vacancy, and any leasing fees you may be charged. I would not evict if the tenants are good payers and have little to no maintenance calls.
@Ashley Mullin Thank you for your reply. I don't want to evict. I think it is not that serious issue, just wanted to hear opinions of experienced investors and learn what other options except eviction I may have.