Landlord Insurance- Extreme Weather Events

Hannah Williams

With around 5,000 Auckland homes being affected by the flood on Friday 27th January 2023, insurance companies have been inundated with phone calls for extensive damage to properties.

Many homes have been damaged requiring extreme repair, which is why having insurance for your property is paramount to protect your investment. Insurance coverage will differ based on your insurance provider and your personal policy. 

Unfortunately, as we have seen over the past couple of days in Auckland and around New Zealand, natural disasters can happen out of nowhere. Our property managers at 360 Property Management are all well-equipped and experienced in dealing with unexpected events and we are on call 24/7. With many properties being affected, we had calls from tenants who had their property damaged during the flood.

Having an experienced property manager in these extraordinary situations can save you time. At 360 Property Management, we deal with the insurance company and assist with making claims. We will arrange any repairs or access needed for the insurer, taking this off your plate.

In cases where insurance is needing to be claimed, record keeping is crucial and inspections are one of the first things your insurance provider will ask for. This is why quarterly routine inspections, in line with your insurance policy, are extremely important. Routine inspections are used as evidence to show the insurance company the most recent condition of the property.  

Our strategy for handling the recent Auckland floods.

The floods have been devastating to many households across the Auckland region. The team at 360 Property Management has and continues to, implement a series of steps forward. This includes: continuing to centralise and prioritise reported damage, liaising with our suppliers to minimise any further and future damages, assessing and advising of any possible insurance claims, and contacting our investors with any damages caused.

We thank you for your patience and understanding during this uncertain time. If you have any questions or concerns, please reach out to our team and we will be in touch as soon as possible.

What are my insurance obligations as a landlord?

As a landlord, you must issue an insurance statement with any new tenancy agreements. This statement will acknowledge whether or not the rental property is insured, and inform the tenants of any information they need to know – including the excess of any relevant policies. It must be clear that the insurance policy is available for the tenants to view upon request.  

If, at any time, the insurance information changes, the landlord is obligated to inform the tenants within a reasonable timeframe. 

For further guidance on insurance in relation to residential tenancies, please visit the New Zealand tenancy services website here.

Do tenants and landlords need insurance for severe weather damage or a natural disaster?

In most instances, it’s important for both Landlords and tenants to have insurance coverage. Tenants are responsible for organising their personal contents insurance to protect their belongings and landlords are recommended to seek landlord insurance to protect their rental property.

Looking specifically at property damage caused by a natural disaster or severe weather events – the responsibility falls back onto the Landlord. As a general rule, Landlords are responsible for maintaining the rental property in a reasonable condition – this includes fixing any damage caused by severe weather.

If the rental is damaged by flooding, the landlord is responsible for drying the property if it has water damage and paying for any necessary repairs to the flood damage. This might also include paying the tenants for electricity charges to run a fan, dehumidifier, or heater to dry the property. 

It is recommended for both tenants and landlords to carefully review their insurance policies and understand what is covered and what is not covered, to ensure that they are adequately protected against severe weather damage.

Preparing for flood damage

In New Zealand, floods are the biggest cause of natural damage to property. Much of the country has a high flood risk, meaning that a high number of properties are located within, or near, flood zones. As a result, some insurance providers take a cautious approach to insuring homes and rental properties in flood-prone areas. 

If you are considering growing your property portfolio, assessing the viability of your investment is a good place to start. We recommend requesting a copy of the LIM report or checking the online council hazard maps to figure out if the property is at greater risk. 

If you have any questions regarding this, please reach out to our expert team who can assist you in finding and securing your next investment property.

What is the landlord responsible for in regard to flooding cleanup?

Landlords are expected to keep the property in good condition and fix any damage caused by severe weather. In the event of flooding, they must make sure repairs are done if the property is still livable and bear the cost of hiring machinery and equipment to dry the home, including electricity charges for the tenants. They should consult their insurance provider for coverage options to help with the expenses.

What happens if the property is damaged but liveable?

If the property is still livable but a portion of it is unusable due to damage, the rent should be adjusted accordingly until repairs are made. The reduction amount should be agreed upon in writing between you and the tenant, as there are no set guidelines.

It’s crucial to consider the overall livability of the property, the safety of the occupants, the repair timeline, when the rent reduction will end or be reassessed, and documenting the damage for insurance or Tenancy Tribunal dispute purposes (if any occur).

Please note that your responsibilities under the Residential Tenancies Act still apply and you must provide 24-hour notice to the tenant for inspections or allowing assessors on the property unless it’s an emergency or the tenant has given consent.

What constitutes ‘partially uninhabitable’?

The legislation doesn’t have a specific definition and it varies based on the tenancy and occupants’ circumstances. For instance, if only a section of the rental property is flooded and tenants must access it to use the rest of the home, it can be considered uninhabitable until the affected area is cleaned or repaired. However, if just one part of the property is damaged but can be isolated, such as a flooded laundry room or garage that can be closed off, the property can still be occupied as it’s only partially uninhabitable.

What happens if the property is destroyed? 

If the rental property is so severely damaged that it’s completely unlivable, either the landlord or the tenant can give notice to end the tenancy, applicable to both periodic and fixed-term tenancies. Landlords must provide 7 days’ notice while tenants must provide 2 days’ notice.

It’s crucial to follow proper notice procedures and this option is only available if the property is considered uninhabitable, not just partially damaged.

The legislation covering this scenario can be accessed here.

In these instances, common sense must come into play however, we reckoned that landlords seek professional advice from the insurer, or Council to confirm the rental property is uninhabitable before issuing a termination notice.

How do we handle the tenancy during the repairs process? 

If the tenant can stay: Notify the tenants of the expected repair duration if possible and remember to give them 24 hours notice if you want to enter the property to inspect the work or obtain their written consent for an earlier entry. A reduction in rent could be considered as compensation for any inconvenience at a mutually agreed amount. In some cases, ending the tenancy early through mutual agreement may be best for both parties, but it’s important to clearly document all agreements and details in writing.

If the tenant has to move out: Negotiate with the tenants to vacate the rental property during the repair work, remembering that mutual agreement must be reached or an application must be made to the Tenancy Tribunal. Inform the tenants of the estimated repair time and when they can move back in. You are not responsible for providing alternate accommodation or covering the cost of it. Make sure to record any agreements in writing.

Are landlords responsible for providing emergency accommodation or the cost of this?

Landlords are not obligated to provide alternative housing or pay for its associated costs. Tenants should turn to Work & Income for aid, including both housing and emergency financial assistance.

Are landlords responsible for damage to tenant belongings caused by flooding?

The landlord is not responsible for loss to the tenant’s personal belongings and this will come under their own personal insurance policy and cover.