Insurance Voided if 3+ Tenants on Lease

[fisherman]

I have been advised by insurance companies that all of my insurance for my rental property will be voided if the property is let to more than three tenants. This came as a surprise to me because in university precincts - the location of this large house - it has been common for decades to have groups numbering four or more.

One insurance company spokesperson gleefully said it wouldn't matter unless the house burned down and in that case the insurer would refuse the claim when it found that there were four people (or more) on the lease.

Even in a three bedroom houses it is not unusual for tenants to sub-lease without the owner's knowledge and thereby voiding the insurance.

Informed comments please.

 

[Xenia]

This only relates to unrelated tenants not families.
Any more than 3 unrelated tenants falls under rooming house laws and not only is insurance voided but tenants can break a lease with one days notice and no penalties. That means that all bond money has to be refunded. This is irrespective of whether a rooming house agreement, fixed term lease or commercial contract was used. I am also quoting SA legislation it may differ slightly in other states.

 

[fisherman]

Xenia

Hi and thanks for the reply.

In this case all of the tenants are unrelated and are on the one lease. I think that rooming house would involve separate leases, ie rent rooms individually and share facilities.

 

[kaf]

Even in a three bedroom houses it is not unusual for tenants to sub-lease without the owner's knowledge and thereby voiding the insurance.

Informed comments please.

Thanks for that fisherman. Mmmh, so does that mean any house-sharing of more than 3 people require a different insurance (who is the insurer)? And is the issue that more than 3 unrelated people live there permanently (maybe without the knowledge of landlord) or that all of them are on the lease (so known to the landlord). And what's unrelated, I would think defacto relationships would count as a relation? This is a bit of a minefield... thanks for telling us about this one.

Cheers

kaf

 

[FlatFoot]

I would suggest you to talk to few insurance broker that has experience in this, RE agent might know or can recommend one, else just find it on the paper. I used one when I try to find insurance for my 7 bedrooms IP.

You can also ask to them on which insurance that easy on the claim and those who gives you hard time.
I had a break-in in one of my IP previously, and the insurance investigator spend more time investigating the incident more than local police did. 2 weeks later, doors still hasnt been fixed and I decided to repair them my self. The total cost is lesser than the owner cost part of the claim.

 

[Xenia]

Xenia

Hi and thanks for the reply.

In this case all of the tenants are unrelated and are on the one lease. I think that rooming house would involve separate leases, ie rent rooms individually and share facilities.

Correct a rooming house agreement is used for renting rooms individually. However some insurances and also the tenancies tribunal sometimes view 3+ tenants as falling under rooming house laws on any lease!

 

[FlatFoot]

I personally feel that rooming house agreement is leaning towards tenants than landlords. They can move out with only two days notice (in Victoria). However when the tenant sign fixed term agreement the contract immediately became common house law.

I once manage this myself and one smart pants tenant try to bring the case to tribunal for breaking our fixed contract earlier with many excuses. He finally gave up when consumer affair hot-line explained to him direct about the contract law.

 

[Canberran]

Thanks Fisherman to bring this up, My landlord insurance is with AAMI. I checked the policy document and can not find any reference to "Void insurance if 3+ unrelated tenants living in the property" term. My understanding is : Insurance companies are not care about the lease/agreement you signed with your tenants. Am I right?

 

[fisherman]

It is urgent for all owners of properties rented to 3 or more tenants to check their insurance policies because I have now found that some have conditions that only cover two unrelated persons living in the rental abode*.

As far as insurers are concerned, a family (I take this as related persons, but this definition needs to be checked for each policy too) counts as one person/unit, so you could (I think) have a family with a friend and this would count as two unrelated persons.

But if another person is added, some insurance policies would be void - which means that if the place burned down the owned would not have coverage for the property or injury to the persons.

In other cases the problem arises after three unrelated persons share the property.

Now I understand that the insurance ombudsman in at least one State is aware of this anomaly (what else could I call it?), but obviously the circumstance continues. I would be very surprised it the Residential Tenancies Authorities and real estate institutes are unaware of the potentially crippling risk some owners have because at some time and unannounced, insurers have adopted the subject interpretation.

This issue has immediate, severe ramifications for owners because some of us are in fact uninsured although we have paid premiums. It also has ramifications for the rental industry, because to treat this insurance risk households over three unrelated persons (or two with some policies) will have to be reduced ASAP.

Can anyone else throw more light on this anomaly?


*Note, I have not checked regarding principal places of residence and I fear that where there are some unrelated people living in a private residence the same limitations will apply.

 

[fisherman]

Thanks Fisherman to bring this up, My landlord insurance is with AAMI. I checked the policy document and can not find any reference to "Void insurance if 3+ unrelated tenants living in the property" term. My understanding is : Insurance companies are not care about the lease/agreement you signed with your tenants. Am I right?

It is not written in plain English and specifically, otherwise I certainly would have bellowed earlier.

They will care if your rental property burns down and you have more than the 'allowed' number of unrelated persons living there.

However you will care even more when they reject your claim and unfortunately the higher fire risk time (autumn through winter) is upon us.