Landlords – how do you protect yourself against the risk of meth labs on your property?

Landlords were no doubt left feeling queasy by recent reports of P (meth) lab raScreen Shot 2016-02-09 at 7.44.50 amids and headlines like ‘soaring cost of meth-tainted housing’, but there are comprehensive steps property owners can take to protect themselves – the answers, however, aren’t simple.

As it stands, depending on your insurer and the exclusions in your policy, you may be protected from meth lab damage to your rental property – at least in so far as your sum insured amount – with the standard property / building insurance and a landlord’s extension. Then again, you might not.

The landlord’s extension to the standard property insurance will usually cover damage that is not deliberate or malicious (bearing in mind that policies differ). Provided
you’ve been able to prove that you have done your utmost to exercise due diligence and caution around protecting your property e.g. regular inspections and or communication with your tenants, your standard policy may protect you from meth damage.

I had a client recently who maintained meticulous records of her rental property inspections – right down to the mileage she travelled – and all her communications with the tenants were on record. As a result, $19,200 of her original claim for $22,000 of meth damage to her rental property was covered. The reason being that it was not an ongoing problem and was deemed to be accidental damage in terms of her policy (and thanks to her conscientiousness).

Her claim included lost rent for the weeks she was unable to rent out the prope
rty, as well as two inspections and decontamination treatments. Damage to the property was mild, by comparison to some and could of course have been a lot worse.

In this case, the level of contamination was higher than acceptable, but not through the roof e.g. the stove had very high levels of contamination, and the tenants were obviously smoking meth in the bedroom. Testing and decontamination was about $15k, because they had to do it twice.

For some extra ‘peace-of-mind’, a landlord can also take out a specific landlord’s cover, but policy conditions and events covered are very specific. This type of policy may include – for example – up to 8 weeks loss of rent if the tenant skips, or $30,000 worth of cover for malicious and deliberate damage (unlike the conventional policy that excludes wilful damage). The cost of this policy averages around the $300 per year mark.

A standard property insurance, together with the landlord’s extension — which makes it clear that the occupants of the property are tenants – plus special landlord insurance against malicious damage (e.g. meth labs), will cover most of your bases and protect you right up to sum insured stipulated on your policy documents.

The important thing however, is to make sure you are making every effort to exercise proper care and maintenance of your property, whether that is hiring a property management company, or keeping an eye on the place yourself. Failure to do so could result in your standard insurance claim being declined – there are specific sections in all policy wordings that say you must do this and it could make things sticky at claim time if you do not.

Illustration Source: Stuff.co.nz

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