Your Landlord Insurance may be affected by your tenants home-based business

[Kath Russell]

I was talking to a friend about this today & they suggested I start a new thread on the subject (I included it in a separate post).

If your tenant runs a business from home, please be aware :

You may need to note this on your insurance as some companies won't cover you for Landlord's Insurance.

After the property manager noticed our tenant was advertising a home based business on her car, she approached her after checking out the website which said "home based business". They denied & said it's a hobby, but they had printing equipment and we were going by their website (and nearly two years of lies) If say that equipment became faulty & burnt the house down, WE WOULD NOT HAVE BEEN COVERED!

All that needs to happen (according to our SGIO advice) is we note it on our insurance and ask the tenant to confirm in writing their business & intentions & they pay for their own separate business insurance (I think it's liability).

 

[13910]

I remember in a couple of rental agreements I had (as a tenant) it was included in the contract that you weren't using the premises for business purposes.

 

[Kath Russell]

Yes uncoversports, they do say you're not supposed to. But in my case, they were, and if the house burnt down, I'd have to recover my costs from the tenants as my insurance wouldn't have covered me.

 

[wylie]

This can be a real problem, especially if you as a landlord have no idea a business is being run from your house.

One insurer told us that a business run from home is fine as long as it does not involve people coming to the home. We got this answer when we discovered one tenant was running his business from home. Turns out that he was okay as there were no client visits involved and he was simply running his business from the office.

The other case we became aware of was a tenant who was having children come to the house to be taught art. The insurance company in this case insisted that the tenant have separate insurance. She didn't want to do that, so she left to rent with a friend. Unfortunately, the poor landlord in that case may not know about the art classes.

To me this is a substantial risk, but I am not sure that there is anything we as landlords can do if the tenant chooses not to divulge that she has started a business with clients coming to the house.

The lease does state clearly that the house is not used for business, but if the tenant chooses to ignore that, then the landlord could be in a serious predicament should something happen to a client visiting the "business".

I imagine the insurance company would not pay up, as ignorance is not a good excuse, but how on earth do you ascertain or control what your tenant decides to do half way through the lease, when it affects your hip pocket should something go wrong?

 

[Kath Russell]

We now have a 'Property Guide' for prospective tenants. Anyone who is considering renting our house (we got new tenants yesterday by the way, move in in two weeks!) is given four pages with additional information regarding if you run a home based business, you need to do the rubbish removal, you need to read the power meter, you need to move the pipe in the dam when the water runs low, you are aware there is a convection oven, not a conventional oven..............Basically how the house operates, separate to the lease and so they know about these things BEFORE they sign & move in.

We've also written a statement about us, our experience with the last tenant, and hope they treat the house as their home & keep us informed of their conduct (especially business from home) so all of us know where we stand, for insurance reasons and to ensure a long & happy relationship.

We really want people to treat our properties as their own home. I don't want to live there. I just want to reap the rewards and give someone a roof over their heads. Win-win.