RentCover Report – we’ve got you covered
Welcome to the October edition of The RentCover Report.
In this issue, we discuss the unbelievably sad – but very important– case of seven-week-old baby Isabella, who passed away when her father dropped her after stepping through a rotten wooden deck in his rental home.
In hindsight, it was a tragedy that could have been avoided, with powerful lessons for real estate agents and property managers, not least of which is that wood rot should be taken seriously even if it doesn’t look too bad from the surface.
While the case led to a number of recommendations for yet more legislation, it also provides insights into how internal work practices could be improved to make sure that issues are communicated and followed up on effectively.
I hope you find this edition useful and look forward to bringing you more insights next month. Sharon Fox-Slater
General Manager, RentCover
News in brief…
An open for inspection went horribly wrong in Byron Bay when the home owner – who was going for a bike ride – was first swooped by a magpie and then, in her efforts to avoid the bird, crashed her bike. She was only to be bitten on the ankle by a brown snake, according to a recent Real Estate Business Bulletin. Luckily, the snake did not release any venom.
The Queensland Government is touting the RentConnect service’s achievements after a backlash over its decision to stop funding Tenant Advice and Advocacy Services. The Government said RentConnect had helped 673 “clients” in the Cairns region since April 2010 – with at least 146 securing private rental market tenancies.
Landlords who need small quantities of building materials for repairs and replacements have a new online resource – www.buildbits.com.au, a Sydney-based website where builders and others can sell and give away unwanted, left over, mis-ordered or second hand bits and pieces.
Westpac is forecasting that the Reserve Bank will cut interest rates to an all time low of 2.75% by the 2013 March quarter, starting with a cut in October.
Tragedy prompts calls for new laws
The death of a baby – who fell from her father’s arms off a verandah after he stepped through decayed decking – has prompted the Queensland Coroner to call for new laws requiring rental homes with older verandahs to be professionally inspected every three years.
The Diefenback family had reported wood rot in the raised verandah to the real estate agency at least four times before seven-week-old Isabella’s death – starting with an entry condition report and including a breach notice issued just before the death on 29 May 2010.
Professional pest inspections conducted on behalf of the owner and a prospective purchaser also identified wood rot in the verandah.
While some repairs had been carried out, Coroner Annette Hennessy found a carpenter’s investigation was insufficient and the tenants continued to complain after the work was “done”.
The Coroner concluded the estate agency’s practices – some of which have since changed – and an industry-wide lack of training combined to prevent property managers from identifying the potential safety hazard. While no-one, including the tenants and property managers, had foreseen the consequences of the verandah’s condition it “is also clear that if the deck was in a sound condition as a whole then this tragic incident would not have happened”.
The Coroner noted the real estate agency had actioned a range of maintenance issues appropriately, but the management of the wood rot had been “suboptimal”.
Lesson from the inquest for property managers
Read building and pest reports
The Coroner urged the agency to change its rule barring property managers from reading expert building and pest reports – a “misdirected attempt to avoid liability”.
Files need to be complete and systems integrated
Multiple computer systems, documents in different places and a lack of communication between sales agents and property managers “would have hampered” staff ability to monitor developments”.
Don’t reassure owners their property is safe if you can’t back
it up The inquest heard evidence that the property manager emailed the owner, stating “I found the deck and steps not to be dangerous” – an assessment the Coroner found she was not qualified to make.
Decking affected by wood rot can appear normal
In this case, there were no “significant” signs of the board’s deterioration from above but an expert said it was evident from beneath, although several people, including a builder, failed to identify its extent.
Get informed about previous inspections and maintenance/repair issues
In a two-and-a-half year period, five different property managers were involved in handling the rental property – as were sales agents – leading to the lack of a “holistic” picture of the issues.
Don’t forget to proactively follow up
In this case, the owner had told the property manager – who was not aware of the tenant’s previous complaints – that repair work was being organised. The Coroner commented she should have followed up when a further complaint was made several weeks later.
New training and rules could be on the way
The Coroner recommended property management training programs be reviewed to include information about inspecting decks, verandahs and stairs – and including potential structural collapse due to wood rot and termite activity in the list of “urgent” repairs.
Other recommendations included legislative amendments to:
• introduce mandatory inspections;
• enable prospective or current tenants inspect any building, pest or termite and other reports; • require agencies adopt uniform systems of recording and passing on tenant complaints, and
feeding owner responses back to the tenant.
A recently-updated property inspection iPhone “app” promises property managers just about everything but a cup of coffee and a foot massage.
The Australian-developed Field Agent app by Apmasphere claims to have completed over 126,000 inspections in 10 countries, while the associated web “community” at www.apmasphere.com has 4500 members.
The app offers agents the ability to view inspection histories, access maps and directions, create customised
reports, overlay past photos to compare history, make comments on photos, suggest frequently-used comments and phrases and schedule future inspections.
The app is free for routine inspections and costs one iTunes credit (about $1) for a detailed incoming/outgoing inspection – which allows more photos and comments to be attached. According to the developers, the average time to undertake an inspection is 22 minutes.
Thieves target copper pipes
It’s not just building sites that risk the theft of copper pipes and equipment – but vacant rental properties, homes for sale and even the local church. General Manager, RentCover, Sharon Fox-Slater, said investors buying a property should check copper pipes are still in place at the final inspection before settlement and take measures to protect pipes.
“You really don’t want that call from the new tenant saying there’s no hot water and then find out all the pipes have been stolen,” she said.
“Investors should remember to let their insurers know if the property is going to be vacant for more than 90 days, she warned.
“Often an insurance claim will not just be for the piping itself, but for damage caused to walls and floors when thieves rip it out,” she said.
Preventative measures could include:
• Painting pipes black, which both disguises them and makes them less attractive to scrap
• Placing alarm sensors in the sub-floor – or, at least, locking access to it; • Replacing pipes with plastic alternatives;
• Installing security lighting and locking gates;
• Informing neighbours if a property is likely to be vacant for an extended period and asking
them to report any suspicious behaviour to police.
Earlier this year, an ABC radio report on copper theft led to a call from a listener, Ken, whose wife was an organist at Gladesville Anglican Church: “At one stage, she was complaining about the fact it wasn’t sounding very good… would you believe that quite a number of the organ pipes had been stolen.”
Have you bundled yourself into a tight spot?
Every ‘Tom, Dick and Harry’ seems to offer landlord insurance these days. Here are some tips to help savvy property investors choose the right landlord insurance...
When is the price NOT right?
You shouldn’t simply purchase on price. A few dollars saved will be quickly forgotten if the policy does not pay for your losses when it comes time to claim.
“Multiple Policy” discounts
Increasingly, major insurers offer “multiple policy” discounts, which sounds great – but a company might have an excellent car coverage and sub standard landlord insurance.
Landlord insurance such as EBM’s RentCover is a specialist product, which is adjusted in reaction to constant changes in legislation and market conditions, which major insurers can’t necessarily do.
But they are cheap….
Cheap? Compared to what? Comparing “apples for apples” is challenging. Ask yourself why a policy is cheap. As businesses, all insurers need to charge enough to pay claims and make a profit – so what corners are they cutting? When comparing policies, examine service, claim settlement speed and excesses – not just policy features.
Value for money
What you need to look for is not “cheap” but “value for money”. You wouldn’t choose a house just because it was the cheapest. You would compare a range features against price. The same applies to insurance. Look for a specialist policy like RentCover that protects you best against the risks associated with tenants as well as normal risks.
These days you can get landlord insurance from a huge number of places, including while you are doing your groceries! However specialist policies tend to offer more comprehensive cover than those adapted from standard household policies – while still being very reasonably priced for the cover offered.
Speak to your industry experts
Legislation may not allow your property manager to “recommend” a specific policy, but they can still be a good sounding board on where to look for the insurance that may suit you best – as they are at the forefront of dealing with tenant-related risks.
It’s up to each individual landlord to choose a policy – but taking a bit of care in the decision-making process and looking beyond simply “the price” may be the smartest decision you ever make.
The above advice about insurance is provided for your general information and does not take into account your individual needs.
Nitin scores for EBM
Just after Nitin Ghosh started with EBM Insurance Brokers in his first professional job, the keen amateur cricketer suffered sunburn so severe his skin blistered and he needed to take sick leave.
“My supervisor wouldn’t believe me… she thought it was just a lame excuse – only to see when I returned after two days that Indians too can have sunburn,” he said.
Almost five years on, Nitin has enjoyed a strong career in EBM, rising to Executive Account Manager and handling major clients, The Investors Club and McGrath Estate Agents, as well as being a senior member of the claims team.
The role combines his expertise with numbers with the ability to relate to people – and he’s never been bored: “I’m speaking to different people all the time and meeting all different kinds of people, providing service to clients.”
Nitin grew up in the Indian state of Punjab but, despite what he claims to be a non-adventurous nature, came to Australia to complete a Masters in Accounting.
He decided to stay and bring his then-girlfriend – now wife – to join him. The couple built a home in the suburb of Tarneit and have a one-year-old daughter, but return to India each year to visit family.
When he’s not spending time with family and friends, Nitin can often be found gardening or playing cricket for the Western Warriors – with sunscreen on.
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