Owning your own commercial investment property can be very financially rewarding, however it also opens property owners up to potential financial risks when rental tenants go astray.  If you are left in the lurch with your tenant owing money for rent, you can be left very much out of pocket for not only rental loss, but also ongoing costs of maintaining the property before you can find another tenant. 

Why do I need rental loss insurance?

You can never predict what might happen with your tenants.  Your property might be successfully leased out and then you find yourself chasing rent because the tenant has had financial losses of their own, or the property comes damaged or destroyed and the tenants can no longer utilise it. 

Here are out top five reasons why you might need to claim for rental loss:

  1. Evicting tenants – You might need to go about evicting your current tenants for any number of reasons.  They might be consistently late on rent, be treating the property with neglect, or there might be illegal activity occurring on the premises which you have come to find out about.  These are all valid reasons for evicting a tenant.
  2. A tenant who leaves owing rent – Your tenant may leave the property for their own personal or financial reasons.  They may find themselves struggling to keep up rent, or have done something to the property which they do not want to be held accountable for.  In any case, a tenant leaving suddenly leaves the property owner needing to keep up repayments and ongoing costs of maintaining the property which would have been covered by rent money.  If the tenant was behind in rental payments when they left, it can be difficult to recoup these costs, even with debt collectors involved.
  3. A tenant who leaves before their lease has expired – If your tenant has broken the lease you will need to swiftly find someone to replace them so that you do not have to pay for ongoing costs yourself.
  4. A tenant who refuses to leave your property and won’t pay rent – In some cases there may be a dispute over the property where the tenant will not leave, so they cannot be replaced, however they are also refusing to pay rent resulting in losses for the property owner.
  5. Tenant issues – Your tenant may have been dishonest and stolen from the property, vandalised the property, or caused damage. The time taken to repair these damages and replace or recover property can be very costly.

What are the costs?

If you are owed rent on your commercial property you may be faced with rent owing in arrears, no current tenant to replace and keep the costs down, time spent on assessing the damage or dealing with the issue, and of course ongoing costs.  Costs of running the commercial property can include utility bills, land tax, and loan.  It is vital to have insurance in place to account for these costs in case of a loss.

How do you recover the costs?

Some loss of rent can be recouped from the bond money, however in cases on property damage, vandalism, theft, or extremely difficult tenant issues, there are much higher costs at stake.  Insurance can cover rent default and associated legal costs, and the loss of rent due to the property becoming unusable due to damage.  In this case, your rental income is protected even if the unexpected does happen.

An experienced and knowledgeable insurance broker such as Challenge Insurance Services can provide the necessary expertise to assess the risks at your commercial property and provide a comprehensive rental loss package.  Contact CIS today to find out how we can help you.