Tenant running a business with clients visiting the premises?

[wylie]

We have a tenant who runs a counselling business from home with clients calling in for sessions. When she first rented the house, we insisted on seeing her public liability insurance so that should a client slip or injure themselves, we would not be at risk of being sued.

With a lease renewal coming up, I'm thinking we should ask to sight the current insurance policy to ensure she has kept up the policy.

I'm also thinking we should write into the lease that we insist on her having such a policy in place.

But... how can we know she will not cancel it, or has not cancelled it after the first year. It would be in her best interests to have such a policy, but it is certainly something we need as landlords. We were told many years ago when someone was running a business from another house that this was required if clients came to the house (but not for a business without clients coming to the house).

Does anybody have any knowledge of how to ensure we protect ourselves in such a situation?

P.S. I will call the insurer who insures the IP and ask them, but I'm curious to hear from anybody who has dealt with this before.

 

[weg]

I'd like to know the answer to that to, but...

what if they didn't have insurance, and you didn't know they were running a business from home, as is often the case (do you know this for sure )?

In that case you'd think that technically you couldn't be at fault if you knew nussing. Yes, no???

 

[Doovalacky]

I've always had public liability coverage on any rental included as part of the insurance. However adding it to the lease as a requirement for them as well sounds like a good idea.

I assume they have the necessary council permits to run a home based business?

 

[wylie]

what if they didn't have insurance, and you didn't know they were running a business from home, as is often the case (do you know this for sure )?

In that case you'd think that technically you couldn't be at fault if you knew nussing. Yes, no???

I don't think I'd like to risk having to rely on the "goodwill" of my insurance company in such a scenario . I reckon they would wipe me like a dirty rag. Insurance companies are not known for being so generous.

I've always had public liability coverage on any rental included as part of the insurance. However adding it to the lease as a requirement for them as well sounds like a good idea.

I assume they have the necessary council permits to run a home based business?

We do have public liability insurance on the house, but I believe this doesn't cover a tenant running a business from the house.

Re the permits, I wouldn't have even thought about checking that. It is not like a shop or anything, just like someone cutting hair in the front room or running an acupuncture clinic. My acupuncturist does exactly this. Must ask him.

I know we had another case where a tenant left (in quite a huff) rather than pay for public liability insurance to cover the art students she taught in the front room. Between my parents and me, we have had probably half a dozen tenants run some sort of business from our IPs.

One chap wanted to fill gas cylinders under the timber house . Our insurer would not cover the house at all if he ran that type of business, so he found another sucker (landlord) to do his dangerous business, and probably didn't even let on that he was "playing with fire". Imagine finding your IP has burnt down, possibly someone blown up, and your insurer has said "sorry, not covered".

 

[Peter_Tersteeg]

Just an observation, but public liability insurance may not actually cover things like clients injuring themselves on the premises. In many cases, PI covers things like professional misconduct.

 

[Macca]

In the commercial world there are times when a copy of the insurance policy receipt is required as part of the lease.

Perhaps you have a photocopy of the policy receipt attached to the new lease when signed, that at least proves you made an effort to protect yourself.

If they are then deceitful and cancel the policy the onus falls on them as a deliberate act to mislead you.

 

[Kinnon Bell]

Assuming you have LL insurance, if you have not checked already, check with your own insurer that you are still covered if your tenant is running a business from home.

One of our tenants came to our PM recently to request that she run a business from home but our LL/Building insurance doesn't cover us if this is the case so we had to say 'no'.

 

[wylie]

Assuming you have LL insurance, if you have not checked already, check with your own insurer that you are still covered if your tenant is running a business from home.

One of our tenants came to our PM recently to request that she run a business from home but our LL/Building insurance doesn't cover us if this is the case so we had to say 'no'.

It was actually the insurer who told my parents that a separate policy was required for anybody injuring themselves on the premises in the course of visiting the "business".

I will follow this up because probably the insurer has changed and I want to ensure that we are covered. Possibly different insurers have different policies in cases like this.

 

[ozsupra]

yes, yes, no...

Why not just put a clause in the rental agreement along the lines of "premises rented as a residential property only. Tenants engaging in businesses of any type do so at their own expense and risk. The lessor excepts no responsibility for claims against public liability, breaches of council bylaws, etc, etc"

 

[brettc]

We have a tenant who runs a counselling business from home with clients calling in for sessions. When she first rented the house, we insisted on seeing her public liability insurance so that should a client slip or injure themselves, we would not be at risk of being sued.

With a lease renewal coming up, I'm thinking we should ask to sight the current insurance policy to ensure she has kept up the policy.

I'm also thinking we should write into the lease that we insist on her having such a policy in place.

But... how can we know she will not cancel it, or has not cancelled it after the first year. It would be in her best interests to have such a policy, but it is certainly something we need as landlords. We were told many years ago when someone was running a business from another house that this was required if clients came to the house (but not for a business without clients coming to the house).

Does anybody have any knowledge of how to ensure we protect ourselves in such a situation?

P.S. I will call the insurer who insures the IP and ask them, but I'm curious to hear from anybody who has dealt with this before.

Hi Wylie

You are right to be wary on a number of fronts.

Firstly, check whether your landlord insurer will cover the property at all when there is a business being run from the premises (I have heard of some companies that say that the cover is completely invalidated if the tenant is running a business from the premises).

From the perspective of our landlord insurance (RentCover), the property needs to be primarily a residential property however we are okay with the tenant running a small business from home, defined in the PDS as “used principally as a place of residence that also contains an office or surgery”, however the cover we provide will not provide protection for anything to do with the running of the business. For example if a visitor to the “business” slipped over and injured themselves you would not be covered under RentCover, the tenant themselves would need to have insurance in place (liability, generally as part of a Business Pack policy) to cover this risk.

However if a visitor to the tenants “residence” slipped and fell, the risk is still covered by RentCover. I would also be wary of the type of business that was allowed.

I would certainly insist on them showing you their current insurance certificate, but ensure that it has been paid and is not simply an invoice, and I would certainly insist on seeing the same at every lease renewal, or at the expiry of the current insurance (to prove it has been renewed). At the same time I would write it into the lease making it a special condition that it remains current and that you assume no responsibility for risks associated to the running of their business.

 

[wylie]

Thank you for the replies. I will be writing the next lease and will add in the clauses as suggested. I will also ask for a copy of the current policy so I can keep my records up to date.

I could not make any calls today but will call the insurer tomorrow to check that it is okay for her to run this business from home. (It was okay when she first went in, because it was checked out at the time, but I'm not sure if it is the same insurer now.)

Thanks once more...

 

[Doovalacky]

It probably depends from council to council but an neighbor had to get an approval to run a home accountancy office next to one IP.

Got a letter asking me if I would have any issues with it and if I agreed there was sufficient parking. Of course you could probably run a small business and get away with it a long time until someone complained.

 

[Angel]

Hi Wiley

I have been away and just saw your thread, sorry for not replying sooner.

My tenant runs Family Day Care and Brett's EBM company was very easy to work with, however you need to be aware of the following:

EBM state very clearly that they are happy to insure your IP under their LL policies, but they will not cover any issues relating to the tenant's business. This becomes tricky as the tenant's business insurance may be very vague about how they indemnify the landlord. In our case, suncorp have a special policy for FDC but it was incredibly vague about us, the landlords, so in the end we paid a higher premium to go with SUncorp LL insurance as it was linked to the FDC organisation and it gave me peace of mind. My tenant paid the outragious difference in price.

The tenant's policy was so vague that there is no way on this earth I would trust it to rebuilt my house if the house burned down as a result of baking cupcakes during business hours.

Please be very very careful. Add a clause stating the tenant has to pay the difference in premium each year if you can, although i havent worked out yet how I'll equitably calculate that when our lease becomes renewable.

 

[Domus]

When proof of insurance is needed, it is known as 'Certificate of Currency'.

The insurance company will provide a document advising the policy is current and maybe a brief summary. Sometimes it is required that the landlords interest be noted on the policy. There is no way to stop the tenant canceling the policy after this, but I would find it unusual.