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?
Insurance Agent · Maitland, FL · Member since 2015 · 397 posts · 244 votes
11y
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.
Investor · Monroeville, PA · Member since 2014 · 102 posts · 32 votes
11y
i always suggest that tenants buy renters insurance, but none have. I like the suggestion of raising the rent if they don't buy it. I think i am going to start requiring it for tenants with pets, if for nothing else for liability coverage in case their dog bites someone...
My insurer offers discounts if renter carry insurance.
It's in my lease that they are required to have insurance and I'm not responsible for personal property. I share a story of another tenant I have. The new roof leaked into a bedroom and tuned his MacBook. Renters inurance reimbursed him. That usually gets their attention. If they don't get it, it's on them.
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.
Derek, with "forced-place renters insurance", you can have a policy in the renter's name even though the renter never signs or agrees to have the policy? Does your office deal with properties in FL?
Investor · Chicago, IL · Member since 2015 · 677 posts · 309 votes
11y
After reading the post of those that have researched this matter I would say it is in your best interest to enforce the renters insurance issue since it is a part of your lease agreement and you do want to be covered for liabilities stemming for renter's actions. Better their insurance pay than yours or you personally.
Investor · El Dorado Hills, CA · Member since 2012 · 1k+ posts · 1k+ votes
11y
Renters insurance is NOT only for the tenant. The liability portion of a renters policy is very important to a landlord. Who pays when your tenant does something stupid that causes harm or damages your building? When their dog bites somebody or they blow a hole through a wall because they were smoking with an oxygen tank or start a fire because they fell asleep with candles burning? Somebody was hurt and somebody has to pay, that's often how our legal system works. If the negligent person doesn't have deep enough pockets then it is on the landlords insurance policy. The claim is handled through your insurance so you are on the hook for the deductible (which can be $5-10k) and the loss haunts you with significantly higher premiums for the next 5 years. Your current carrier will likely cancel you for being sloppy and not forcing your tenant to get coverage.
If the tenant has $100-$300k in liability insurance on their renters policy with you named as an additional insured, their policy would be first in line or your carrier can handle a property claim and subrogate against the tenants renters policy.
St Thomas, Ontario · Member since 2013 · 575 posts · 408 votes
11y
@Account Closed Is right I think. The standard lease I use is provided by a local landlord's association and is widely used here. It requires tenants to carry renter's insurance including coverage for property and general liability. I write to all tenants and ask for written confirmation of coverage once a year. My tenants appear to be compliant in this regard, which is one aspect of good screening. They do not get the keys without showing me a current renter's insurance policy.
After that they could cancel it of course and that begs the question of what to do. I could try and enforce the clause but that requires expensive filing fees ($170) and unclear prospects of being able to evict and then there is the question of whether I want to evict. Eviction would be an unpleasant process (I have done it before, although only once due to good screening). An eviction would not allow showings while the tenant is resident in the property, meaning a vacancy likely of two months minimum. At my average rent that is $2,500 lost, plus costs. As @Account Closed suggests this may be a lot to go through. They may have other lease violations but would you pursue them all through eviction? I think this could be an extreme response.
Sunnyvale, CA · Member since 2014 · 15 posts · 1 vote
11y
I started this discussion in February. In March there was a flooding in the furnished basement of the home and the tenants belongings were damaged. Even after that they still didn't get a rental insurance.
Investor · Granite City, IL · Member since 2014 · 658 posts · 301 votes
11y
In Illinois, you cannot evict over this issue - at least not immediately. We have to provide a 10 day notice to cure (and this probably applies in Indiana as well). You tell them why they are violating the lease and what they need to do to make the violation go away.
Would I necessarily use this provision to evict. No if the client was someone who paid on time, kept the place well, etc. Yes if the client was always causing trouble, keeping the place trashed, or I was constantly chasing them for payment of service provided.
Use this provision as an "out" to get rid of the troublesome clients. Most won't cure the lease and then you can start the eviction process.
If the tenant has $100-$300k in liability insurance on their renters policy with you named as an additional insured, their policy would be first in line or your carrier can handle a property claim and subrogate against the tenants renters policy.
This is exactly why I pay for my tenants' renters insurance. I control the situation. My State Farm agent creates a policy in the name of the tenant with me as an additional insured.
Tenants seem to appreciate it as a bonus when viewing my properties and when signing the lease.
Chelmsford, MA · Member since 2017 · 1 post · 0 votes
9y
you can put a clause in if you want.. it holds no wieght unless it complies with the laws in your state . Under my state law , they cannot require of force you to have anything except 4 items up front at lease .
First
Last
Security
And key deposit
What are you not getting ?
It is protection that is optional for the tenant's belongings and has nothing to do with you if they do not want it . Many landlords are getting kickbacks from insurance people . If so and they ask for your records you may get sued . I would tread very carefully and obey the codes in your state . If is very simple really !