Should I require renter’s insurance from my tenants? Seems like an easy question, but something you may not have given much consideration to. As landlords, we try to avoid litigation, and this is one item that can be easily covered. Although it is not required by law, if there is a fire, flood, earthquake, or some other disaster, you, the landlord, may find yourself in court.
RENTAL AGREEMENT
Which rental agreement are you using? I have used several over the years, but my current choice is the form furnished by the Apartment Association. This form has a box that can be checked “obtain” or “at their option maintain” renter’s insurance. It also puts a minimum of 100K coverage, which is a standard amount. Other agreements may be more vague, or have no reference to renter’s insurance. Another option: You can always add your own wording, or even add an addendum to your rental agreement.
COST TO TENANT
How much will this cost? This will usually be the first question you will get from a prospective tenant as they are budgeting for rent, utilities, and other expenses. According to valuepenguin.com, a California renter’s policy will be less than $20. per month, and in some cases below $10. Well worth the expense when all of the tenant’s belongings are at stake.
LIABILITY
The rental agreement should also clearly point out that the tenant’s failure to maintain such a policy shall be a complete waiver of the tenant’s rights to seek damages against the owner for the aforementioned losses (fire, theft, rain, water, overflow/leakage, acts of God and any other cause.) It is always a great idea to have the wording approved by your personal real estate attorney.
All this being said, anyone can sue anyone else for anything at any time. This doesn’t mean they will win, but it will require you to address the issue with a legal response. In other words, you may need to hire an attorney. California is a fairly litigious state and there are no guarantees that you will never be sued by a tenant who has lost his or her possessions, even though they failed to abide by the contract and obtain renter’s insurance as you had required.
Take a look at your current rental agreements and see how this issue is addressed. If you are not comfortable with it, you may need to make some adjustments and you may want to use a different agreement in the future. The Apartment Association, most eviction attorneys, and legal websites are available with a huge selection of forms.
What we at PRS PROPERTIES CAN DO. We can discuss with you the current rents in your area and supply you with comparable rental prices for similar properties. Before you hire a manager, make sure the compensation is fair to you! We can also look at your building for changes that might allow you to get a higher value in order to create value without huge expenses for your building. We can help you to get the maximum value for your property, should you decide to sell, or the maximum return if you are planning to keep your building.
We always have many investors who are looking for “as-is” properties and are willing to purchase with low rents, a moratorium, or even with a problem tenant in place. We have put together numerous transactions over the years which involve properties that are not listed for sale. Many investors are in 1031 exchanges and need to identify a replacement property before their 45-day identification period runs out.
Should you decide to put your property on the market, we will put together an aggressive, targeted, and professional campaign to get your property sold fast. We have been doing this for over 40 years, and we will use all the tools available to bring you the most dollars at closing. If you are thinking of selling or are just curious about the value of your property, don’t hesitate to give us a call.
Remember – KNOWLEDGE IS POWER!
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