Author: Anthony Scott, Watkins Taylor Stone
The COVID-19 pandemic has been declared a catastrophe by the Insurance Council of Australia and decisions being made by all Governments are having a profound effect on our economy.
One area being hit hard is the domestic rental market and understandably, we have seen a spike in landlords taking out rent-default cover due to the financial distress expected to be experienced by renters and Landlords alike.
In a similar approach to putting embargoes in place when bushfires are approaching, a number of insurers have suspended the optional Rent Default sections within their landlord insurance product. This embargo applies to any new business, as well as any new endorsements to existing policies.
Whilst some insurers have adopted the embargo approach in restricting the availability of the optional Rent Default section, other insurers have ceased writing any new landlord policies for a period of time yet to be determined.
In these challenging times, there are several key points to highlight: –
- Renewal of existing landlord policies will likely continue without change. We are yet to see any insurer announce an exit from the landlord market due to COVID-19.
- Watkins Taylor Stone continue to have access to a range of landlord products (excluding Default of Rent). We can continue to assist any landlord who has identified they do not have any landlord insurance in place. Likewise, we can assist on new property acquisitions.
- It is important to highlight that markets for rent default may exist that we are not aware of. Our above comments are not intended to be representative of the entire Australian landlord insurance market.
FREQUENTLY ASKED QUESTIONS
We are receiving a large number of enquiries from agents and landlords alike as to the extent of cover available under a Default of Rent policy related to COVID-19. Following are some frequently asked generic questions on this. When reading them, please keep in mind that policies do vary and all claims would need to be considered under the applicable policy, terms and conditions.
Q. Will I be covered if the tenant loses their job and is no longer able to pay rent?
A. A policy usually provides cover for tenant default irrespective of the cause, subject to all the terms and conditions of the policy.
Q. The policy requires the landlord to take all reasonable legal steps to remedy non-payment, is this still applicable?
A. We are reviewing this as it’s not completely clear given recent federal and state government measures to prevent tenant eviction. Decisions around financial hardship are expected soon. Once these have been published, we will be able to provide more concrete guidance. In the meantime, all claims would be assessed per the insurers current procedures and be subject to the terms and conditions of the applicable policy.
Q. What happens if the landlord needs to change the conditions of the lease agreement?
A. It depends on the agreement made with the tenant:
- If the rent-payable amount is reduced, should the tenant default on payment, the policy would respond based on the latest rental, in this case the reduced rental amount. The difference between the original rent and the newly agreed reduced rent is not covered as this is an agreement made between the client and the tenant and is not a default.
- If the landlord agrees with the tenant to stop collecting rental payments, the policy will not respond as it is an agreement made between the landlord and the tenant.
WE ARE HERE TO ASSIST
The team at Watkins Taylor Stone have been working remotely since the 18th of March. We are unable to access our post office box or send any outgoing mail in the post. Outside of this, our business is fully operational and we are working with our clients through these difficult times.
Our main office number remains active (02 9488 8300) and your call can be transferred to the appropriate team member who can assist you with your enquiry. If you are experiencing any difficulty in contacting our office, please send an email to email@example.com with your contact details and we will have a team member contact you.
We are all in this together and will do our utmost to assist. Please reach out with any queries you or your clients may have.
The information contained in this document is not intended to be financial product advice and does not take into account your objectives, financial situation or needs. Therefore, before taking any action as a result of this document you need to take those matters into account.