The Habitability Exposure means that, according to laws, statutes and regulations, any residential unit must be leased in a condition that meets the standards of local health and safety codes, which address matters such as providing working heaters, screens on windows and smoke detectors; controlling insect and vermin infestations; maintaining walls and countertops; maintaining pipes and electrical wiring, etc.*
Federal regulations impose additional requirements on landlords in residential properties, such as addressing led paint and providing adequate handicap accessibility under the Americans with Disabilities Act.*
More and more, insurance companies are restricting limits for such claims or outright excluding such claims which also denies defense. This is particularly true of the “secondary market”, or what the insurance industry calls Excess & Surplus Lines and other specialty insurers. As insurance companies in the preferred (primary) marketplace continue to find ways to non-renew insurance policies, this is becoming quite an issue.
What can you do to protect yourself? As companies continue to restrict coverage that surrounds the habitability of property, here are a few ways you can minimize your claims potential and protect yourself:
Documented Management of the Property
· Habitability claims can go back several years. Maintaining documentation of property managements is highly recommended.
Implement Policies and Procedures for Tenant Complaints
· Provide clear expectations and assurance for tenants.
· Allow for documented and repair progress tracking of issues reported for the property.
Regular Property Inspections
· Schedule periodic inspections to help identify issues early; we suggest minimally that these inspections are made quarterly
· Know your tenants; verify the number of tenants/unit against the lease agreement.
Prompt Maintenance and Repairs
· Responsive and timely (within 30 days) repairs are crucial. Fix leaks, faulty wiring, or broken appliances promptly.
Pest Control Measures
· Regular pest inspections and treatments prevent infestations
· Implement preventative measures like sealing entry points and maintaining cleanliness.
Courtesy Mercury Insurance
Landlords are caught in between the costs of maintaining and insuring properties they rent to tenants and rent control in many areas denying them the ability to increase rental rates to help off-set these costs.
It is even more daunting for property owners as California has transformed from relatively newer construction to what is now older property that need a major overhaul.
This is an unspoken part of the insurance crises. Property owners have been able to rely upon insurance companies updating their properties as a result of roof claims to the replacing of older construction quality with new materials following a fire, water, or other insurable claims.
However, this situation is coming to a rapid halt as insurance companies are sending out questionnaires, requiring that you provide the when & where updates to your properties have occurred; some companies are even demanding receipts!
Companies are also sending drones into neighborhoods to view your roofs for wear & tear and discoloration – a sign of water damage (actual or potential) which will typically generate a non-renewal which thrusts the property into the secondary market with higher premiums and deductibles.
If your property is older and not maintained well, and if older wiring, plumbing, and roofs are still present, it is likely that your policy will not be renewed – thus forcing you into a more expensive marketplace for your insurance protection, which will also provide you with less protection.
Because of all of the issues noted, we strongly urge you to invest in a property management company’s services; interview a few and find the right one! Property managers can assist you with ensuring that your properties are properly maintained and help you to avoid the legal maze of tenants’ rights. Their services will provide the type of attention to your property that insurance companies want to see .
PROPERTY MANAGEMENT COMPANIES CAN ALSO MAKE YOU INFINITELY MORE PROFITABLE in most cases, likely generating additional rental income which can help you upgrade your properties which will lead to better insurance options.
Being a landlord is a tough business! Hopefully, the situation with the insurance affordability and availability crises will help to force positive changes in the rental property industry’s regulations. We also believe that this situation will cause property owners to make the changes needed to be more attractive to the more competitively priced insurers.
*Parts taken from AMWINS, an apartment insurance outlet often using the E&S marketplace for apartment insurance coverage offerings. 10/25/2022 posting.
