Whether you’re a seasoned landlord with a diverse portfolio or a first-time property owner, understanding the nuances of landlord insurance is paramount to safeguarding your assets and mitigating financial risks.

As the rental market continues to evolve and new challenges emerge, having the right insurance coverage can make all the difference in ensuring your peace of mind and financial security. From property damage caused by unforeseen events to liability claims arising from tenant disputes, we will cover the top four protections your landlord insurance policy should have based on our experience. Over the last four decades, we’ve managed thousands of single-family homes for landlords just like you. We speak about where we’ve been and what we’ve seen.

What is Landlord Insurance?

Landlord insurance is different from your homeowners’ insurance policy.  Landlord insurance protects you when you lease out a house or apartment unit to a tenant and covers your rental property dwelling, other structures (such as a fence), your personal property and liability.

A standard homeowner’s policy will not cover damage to your rental property and won’t cover you in the event there is a lawsuit. So, landlord insurance provides financial protection from damage caused to your units rather than a home or apartment you live in yourself.

What Does Landlord Insurance Cover?

Most policies provide the basic coverage of property damage, liability, and loss of rent. Basic is ok but it leaves you dangerously vulnerable in a litigious climate. Based on our experience, we highly recommend some expanded coverage that will keep you more protected than the basic coverage. I’ve listed those below.

       Basic Coverage

1. Property Damage Coverage: This covers the physical structure of the rental property in case of damage from events like fire, storms, vandalism, or theft. It may also cover other structures on the property like garages or sheds. It may also include coverage for personal property that you use to maintain the property such as a lawnmower or snowblower.
2. Liability Coverage: Liability coverage protects you in case a tenant or visitor is injured on your rental property and decides to sue. It can help cover legal fees, medical expenses, and court-ordered damages.
   For the best protection, increase your coverage from $300,000 to $1million. The premium increase is nebulous.
3. Loss of Rental Income Coverage: If your property becomes uninhabitable due to covered damage, this coverage can reimburse you for the lost rental income during the repair period, up to 12 months. It’s important to note that not all policies offer this coverage, so it’s worth checking with your insurance agent.
   During our tenure as a property management company, we’ve had five house fires. Most were caused by residents and most resulted in the home being uninhabitable for a minimum of 12 months. With loss of rent coverage, you will be paid up to 12 months at the current rental rate, while your home is being repaired.

   Expanded Coverages

4. Malicious Intent: Some insurance policies include this coverage. Most policies do not. If you own a rental property, you need to have this coverage in your policy. This coverage will protect you from damage that is deemed above normal wear and tear damage caused by the resident.
   If your insurance company doesn’t offer Malicious Intent, I highly recommend that you find a new insurance company.
5. Gap Coverage: Just like in car insurance, landlord insurance has a “secret” gap coverage. I say “secret” because most companies will not mention this coverage to you because it costs them a lot of money. The gap coverage covers the gap between the current coverage and the market value of the home.
   Last year, we had a kitchen fire in a condo in Corona, California. The resident started cooking food, decided to run to the store, and left the stove on. The unit suffered a fair amount of damage. The owner filed a claim with his insurance company and when the numbers started rolling it, it was discovered that he was underinsured by $42,000. The owner’s insurance policy didn’t include gap coverage. He was not aware of the option to “elect” this coverage when he obtained insurance. The owner had to front $42,000 so that work could start on the condo.
6. Extended Vacancy: Most insurance companies will only cover your property for 30 days of vacancy. On the 31^st day your property could be uninsured on certain portions of your policy. The most common item is the outside portion of your AC unit. If you are anticipating a longer vacancy period, due to an extensive remodel, or the market is slow, then call your insurance company in advance and seek an extension.
7. Fire Policy: A fire policy will pay to rebuild your property. It’s important that you ensure your policy covers a full replacement of your rental property.
8. Medical Coverage: The standard policy includes $1,000 per incident. We highly recommend increasing this to $5,000 per incident. The cost to have the additional coverage is minor compared to having to come up with several thousand dollars to cover a tenant’s deductible or medical expenses.
9. Mold Coverage: SoCal has seen an abundance of rain over the last few years. With this rain comes water intrusion, water intrusion leads to mold. In the last 18 months, we have seen nearly 10% of our properties battle mold. The cost to mitigate the mold is outrageous. Do yourself a favor and ensure your policy covers mold.

Exclusions

Do yourself a favor and read the exclusions section of your policy first. Like any insurance policy, landlord insurance has exclusions. Common exclusions may include wear and tear, such as paint that is over two years old and carpet that is more than 10 years old. Certain types of natural disasters (like floods or earthquakes), and intentional damage caused by the resident.

Before purchasing landlord insurance, it’s advisable to consult with insurance professionals or agents to ensure you understand the coverage options and choose the policy that best fits your needs as a property owner.

Ron Sudman and Management One are insurance brokers this is for your information only. Make your decision with the insurance agent as all companies are different in what they charge and the type of coverage they give.

On another helpful tip, learn How to Always have Money for Repairs from Rod Sudman.

In January 2024, new rental property laws were introduced in California, including a redefined term for ensuring equal access to dwellings for individuals with disabilities. This article’s objective is to clarify these legal changes and help California landlords avoid Fair Housing issues.

Navigating the Nuances of Property Management: A Guide to Reasonable Requests

Within property management, the terms “reasonable accommodation” and “reasonable modification” can be confusing despite their differences in ensuring accessibility, particularly for residents with disabilities. This article seeks to demystify these terms and offer clarity to both property managers and residents.

What is Reasonable Accommodation?

Reasonable accommodation entails adjustments or exceptions to rules, policies, practices, or services to ensure equal housing opportunities for individuals with disabilities. It centers around the concept of adapting the way tasks and procedures are conducted.

Key points about reasonable accommodation include:

1. Individualized Assessment: Each request for reasonable accommodation should be considered on a case-by-case basis, considering the specific needs of the person with the disability.
2. Not Unduly Burdensome: The accommodation should not impose an undue hardship on the landlord such as significant expense or difficulty.
3. Interactive Process: Often, fulfilling a request for reasonable accommodation involves an interactive process between the individual with a disability and landlord to determine a suitable accommodation.
4. Legal Requirement: In many cities providing reasonable accommodation is a legal requirement under disability rights laws, such as the Americans with Disabilities Act (ADA) in the United States.
5. Confidentiality: The process of requesting and implementing reasonable accommodations should respect the individual’s privacy and confidentiality.

Understanding and implementing reasonable accommodation is vital for creating inclusive and accessible environments for individuals with disabilities, ensuring they have equal opportunities in housing.

Examples and Scenarios from Fair Housing:

• Allowing a resident with a service animal in a no-pet home.
• Allowing a resident to pay on the 10^th of the month instead of the 1^st because their disability checks don’t come in until the 9th of the month.

What is Reasonable Modification?

Physical Changes for Accessibility: reasonable modification encompasses physical alterations to the current or prospective living spaces of individuals with disabilities, enabling them to fully enjoy and utilize the premises. It entails making structural changes to the property.

This concept is commonly applied in the context of housing and is distinct from reasonable accommodation, which typically involves changes to rules or policies.

Key aspects of reasonable modification include:

1. Physical Alterations: It involves making physical changes to the living environment. Examples include installing grab bars in bathrooms, widening doorways for wheelchair access, or modifying the height of countertops and sinks.
2. Purpose: The modifications are made to ensure that a person with a disability has full enjoyment of the housing and its facilities.
3. Resident’s Responsibility: Unlike reasonable accommodations, which are usually the responsibility of the landlord, reasonable modifications are often made at the expense of the person with the disability. However, there are cases, especially in publicly funded housing, where the housing provider may be required to bear the cost.
4. Permission from Housing Provider: Residents may need to seek permission from their landlords before making any modifications. However, under laws like the Americans with Disabilities Act (ADA) and the Fair Housing Act, landlords are generally required to allow these modifications.
5. Restoration Requirement: In some cases, the resident might be required to restore the property to its original condition when they move out, especially if the modifications could be deemed unreasonable for future residents.
6. Legal Protection: People with disabilities are legally protected to request reasonable modifications in their homes. Housing providers are obligated to allow these modifications when they are necessary for the individual with a disability to fully use and enjoy the dwelling.

1. Applicability: Reasonable modification applies to both private housing and publicly funded housing, including rental units and units for sale.
2. Advance Planning: When planning for modifications, residents should communicate with the housing provider about the intended changes, and in some cases, may need to provide documentation related to the disability and necessity of the modification.
3. Quality and Safety: Modifications should be done in a professional manner, adhering to building codes and standards, to ensure safety and functionality.
4. Shared Spaces: In addition to modifications within a resident’s dwelling unit, reasonable modifications can also apply to common use areas like lobbies, laundry rooms, and clubhouses to ensure accessibility.

In summary, reasonable modification ensures that individuals with disabilities can live independently and comfortably in their homes by allowing necessary structural changes to their living environment. This right is a crucial aspect of disability accommodation laws, promoting inclusivity and accessibility in housing.

Per U.S Department of Housing and Urban Development Examples and Scenarios:

• Installing grab bars in the bathroom of a resident with a disability.
• Modifying the height of countertops for a resident in a wheelchair.
• Lowering light switches.
• Installing a wheelchair ramp.

Key Differences Between Accommodation and Modification

1. Nature of Change: Policy vs. Structure
   • Accommodation: Changes to policies or practices.
   • Modification: Physical alterations to the property.
2. Who Pays?
   • Accommodation: Typically, no cost to the property owner, as these are changes in policies or practices.
   • Modification: Often at the resident’s expense, though there are cases where the property owner may share or take on costs.
3. Legal Framework
   • Both fall under the Fair Housing Act, which prohibits discrimination based on disability. However, the specifics of how each is handled can vary based on local laws and housing types.

What Can the Landlord Require Before Approving the Accommodation or Modification?

A landlord may want to request a verification of disability from the person making the request for accommodation or modification, to confirm the person, in fact, has a disability. Legally, you can ask for this if the disability isn’t obvious. For example, if a person is using a mobility device to get a round, asks for a wheelchair ramp, a landlord can’t ask for a letter proving disability, it’s obvious. On the flip side, if someone asks for a rental payment modification and they don’t have an obvious disability, you can ask for proof. An example of this would be someone who gets disability for a back injury, they are disabled but it’s not obvious.

What are acceptable forms of “proof”?

A doctor’s note is probably what comes to mind for most people as proof of a disability.  However, the law allows for a lot of flexibility in the manner. A reliable third party who is in a position to know about the individual’s disability or disability related need. Per HUD, these third parties include but not limited to:

• A medical practitioner
• Health care practitioner
• Person from a peer support group
• Non -medical service agency
• Family member who cares for the individual

In some cases, the individual can “self-verify.” In the case of requesting to pay rent on a different date, the individual can provide documentation showing dates they receive their disability.

In most cases, if the above-mentioned requirements are met, a reasonable modification can’t be denied.

Denying A Reasonable Accommodation:

According to Fair Housing, there are three main reasons reasonable accommodation can be denied.

• Undue financial and administrative burden on the landlord. There are many factors that play into this determination and should be addressed on a case-by-case basis.
• Fundamental alteration of the services or operations. For example, a landlord doesn’t provide a washer and dryer, so the resident requests laundry service. The laundry service would be a fundamental alteration of service.
• Direct threat to the health or safety of others. This determination requires an individualized assessment.

NOTE: We are not attorneys. We strongly recommend that you speak with a Fair Housing attorney before denying any request for reasonable accommodation or modifications.

Conclusion: Fostering Inclusive Communities

Understanding the distinction between reasonable accommodation and modification is not just about legal compliance; it’s about fostering an inclusive and accessible environment for all residents. By addressing these needs effectively and empathetically, landlords and management companies, alike, can create a welcoming community while respecting the rights of all parties involved.

Remember, at the heart of these terms lies the goal of creating a living space where everyone, regardless of their abilities, can feel at home.

Insurance, Insurance, Insurance! If you’ve been around a while, you are probably sick of hearing me talk about insurance and proper coverage.

If you’re new here, welcome to the annual insurance service announcement.

All joking aside this is a very important topic and I wholeheartedly believe in talking about it at least once a year.

“Why”, you might ask. I never want an accident to happen and a client of mine, to say, “no one ever told me about this coverage”.

In 2022, we had two house fires and a condo that flooded. In 2023, we had a condo catch fire. Things happen and you don’t know when they are going to happen.

In addition to Primary Liability Coverage, there are four essential elements that all Landlord Insurance policies should include. These elements are Malicious Intent, Fire, Loss of Rents, and Vandalism.

Malicious Intent

Malicious Intent happens when the resident renting your home, intentionally damages the property above and beyond “normal wear and tear.” We are talking destroys the carpet to the point it must be replaced, holes in the wall, overall filth, piles of debris left behind, and more. While we don’t see these things very often, we do see them. So when it does happen, landlords are left scrambling to secure the funds to bring the property back to a rentable condition. This scenario is precisely why it’s important to ensure you have Malicious Intent in your policy. Equally important is ensuring the resident has Renter’s Insurance so you can recoup the cost from their policy and not affect your premiums. YES, this coverage enables you to sleep at night. The best part is most insurance companies don’t charge extra for this coverage.

Fire

Your fire policy will rebuild part or all of your rental home only, so this is pretty straightforward. Just make sure each year that you increase the replacement cost of the rental home. In the last 2 years, building materials went up 39.2%. Most insurance companies will not adjust for inflation.

Loss of Use

Now, let’s start thinking like an investor; you are all investors if you own a rental property. Your business is to make money with an investment/rental property! But what happens if the property burns down, which happens, or the resident causes so much damage to the house that it will take six months to be fully repaired. You still have a mortgage to pay, right? That payment doesn’t stop just because the home is vacant or in distress. Don’t worry! If you have Loss of Rents or Loss of Use coverage in your landlord’s insurance, you may sleep like a baby because you don’t have anything to worry about. Loss of rent or in some cases, called Loss of Use will cover up to 12 months of the rental income! Some companies include this coverage in your policy for no additional fees while others charge for it, but… IT IS WORTH IT! It might be a few more bucks a month but, how much is your peace of mind worth?

What a great feeling to know that you will receive money while your property is being repaired.

Vandalism

Let’s say you are about to rent out the property and a few days before your resident moves in someone breaks in, and the property gets vandalized!

Again, homeowner’s insurance might not cover you! But, the landlord’s insurance will! However, once your property is vacant for more than 30 days your insurance will not cover you so always get a 60-day vacancy policy. One Air Conditioning unit stolen could cost you $4,000 or more. You can activate your vandalism coverage in this case!

Something important to mention is that some mortgage companies request that you to homeowner’s insurance while you have an active loan with them! Be sure to ask them if this is the case before canceling your homeowner’s coverage and getting landlord’s insurance only.

Liability

Though not listed in the top four items, liability is the primary focus of the insurance policy. After all, why have a policy if it doesn’t provide basic liability coverage? You may consider increasing the liability coverage if your property has a pool or spa since those are added risks, whether you own the home or are renting the house. For example, your resident has a small soiree, and a kid gets injured because he was running around the pool! We all know, unfortunately, the first thing that comes to some people’s minds is… LAWSUIT! Well, again, here is where you may be able to use your landlord’s insurance liability coverage since this helps you pay for your expenses if you are found legally responsible after someone is injured on your property or if you are required to pay for damage done to someone else’s property. I carry $1,000,000 liability coverage on my properties.

Renter’s Insurance

We require our residents to carry a renters insurance policy. All new residents must provide a copy of their insurance prior to moving into the rental property. All current residents must provide a recent copy of their declaration page before they renew their lease. We do this to protect not only the resident but you as well.

Two recent fires were caused by the resident, one resident had current insurance and one had let their policy lapse. The flooding of the condo was caused by a contractor working on the unit above and hitting a water line.

Thankfully all parties are safe and no one was injured but you never know when something might happen. It doesn’t have to be a fire or flood, it could be an eviction. People react differently when the pressure is on them, during a recent eviction the resident allowed their animals to poop in the property to the toon of having to replace the flooring. This act was a malicious act and the insurance company paid for the damages.

If you are unsure about your policy, make time this week to talk with our insurance company and confirm your policy. You will be glad you did if you ever have to use it.

If you need a referral to a company that we highly recommend, contact Connie today at 951-289-4063, we are happy to help.

Why am I being charged for repairs after a resident moves out?”  “Shouldn’t the resident be responsible?”

These are common questions from landlords, and the honest answer is that it often depends on how the court—or even a specific judge on that day—interprets the situation.

As your property management company, we’re positioned between both the landlord and the resident, each believing they’re entitled to the security deposit for things like damages, cleaning, or painting. When no agreement is reached, the matter can end up in court, where decisions frequently favor the resident.

Our role is to keep you informed about evolving rental laws and share our observations from small claims court. Recently, judges have taken a firm stance against “nickel-and-diming” residents, often dismissing claims for minor items like light bulbs, batteries, basic cleaning, and touch-up painting.

As the Law Reads

The categories below fall under Tenant-Landlord Law. While each has its nuances, the courts are generally clear on who is responsible for what.
Carpet: Has a 10-year lifespan and may be prorated if damaged before that time.

• Paint: Considered to have a 2-year lifespan.
• Blinds: Typically last about 4 years.
• AC filters, smoke detector batteries, lightbulbs: These are viewed as standard costs of doing business.
• Normal wear and tear: This is the most subjective category and often the hardest to define.

Let’s take a closer look at each to better understand how they’re handled.

Carpet

Carpet typically has a lifespan of 10 years, although this can vary depending on the quality. If it was newly installed when the resident moved in and they lived in the home for five years, the cost of replacement is generally split—50% covered by you and 50% by the resident.

Paint

Paint has an average lifespan of two years, which courts generally consider when determining responsibility. If the home was freshly painted before move-in,

• Resident stays less than 1 year: They’re typically responsible for 100% of repainting costs.
• 1–2 years: Costs are usually split 50/50.
• After 2 years, Painting becomes the owner’s responsibility.

To extend the life of your paint, we recommend using high-quality brands like Vista or Sherwin-Williams and opting for a water-based semi-gloss, which allows scuff marks to be easily wiped clean.

If a resident paints the walls a custom color and doesn’t restore them before moving out, they may be charged for one or two coats of paint, regardless of how long they lived there.

If a resident patches a hole (e.g., from a mounted TV), you may charge for patching, sanding, and texturing before the two-year mark. However, after two years, painting over the patch typically cannot be charged, as courts often deem it part of expected maintenance.

Lastly, always paint like-for-like. Spot painting with flat paint over semi-gloss may not be accepted as proper touch-up work, as it will stand out.

Blinds

Blinds have an average lifespan of four years, though this can vary based on quality and sun exposure. Prolonged direct sunlight can cause blinds to wear out more quickly. As with carpet and paint, courts typically apply a proration based on the age and condition of the property.
If damage is due to misuse, such as bending or reaching through the slats, the resident may be held responsible. However, if the blinds are over four years old, most judges will consider the damage normal wear and tear and place the cost on the owner.

Misc. Items or Smaller Items

Courts have shifted their stance on minor items, such as light bulbs and smoke detector batteries. While residents were once held responsible for replacing them upon move-out, judges now often question whether a bulb simply burned out when the switch was flipped or if a battery died naturally. Since it’s nearly impossible to prove otherwise, these items are now generally considered part of the cost of doing business for property owners.

Abuse and Damage

In cases where the resident causes damage, such as a dog digging in the yard, chewing on sprinkler lines, or creating holes in window screens, these are considered tenant responsibilities. Missing screens or smoke detectors also fall under resident damage. In such instances, the costs of repairs or replacements will be deducted from the resident’s security deposit.

While it may not always feel fair for landlords to cover certain repair costs, court rulings today often favor residents. To protect our clients, we’ve been documenting properties with video and audio walkthroughs since 1992. This thorough documentation helps us assess damages accurately. To offset these costs, we recommend modest annual rent increases—just $50 a month adds up to over $12,600 in six years. This approach ensures funds are available for necessary repairs and improvements, and we encourage landlords to consider our suggested increases at renewal time.

So, how to make sure you will have the money when you need it for repairs?

As mentioned in previous articles, it’s wise to open a separate checking account—label it “Investment Checking”—to ensure increased rent income isn’t unintentionally spent. By keeping rent deposits separate from your funds, you’ll have the $12,600 (or more) available when repairs or improvements are needed.

Every year ushers in a fresh set of regulations for landlords, and 2024 is no different. The upcoming changes encompass various aspects such as Section 8 applicant guidelines, security deposit thresholds, and more. Fortunately, not all these regulations became effective on January 1st, allowing property owners and managers ample time to get ready for these changes. The purpose of this article is to give a brief overview of the new laws. We will take deeper dives into each topic throughout the year. Let’s delve into the most important new laws that demand your attention.

Section 8 Applicants

Several years ago, a mandate was established requiring all landlords to accept Section 8 housing vouchers for their rental properties. This meant that if you had a property available for rent, you were obligated to consider applicants with these vouchers. To be eligible, Section 8 applicants had to meet the same qualifications as any other prospective tenant. They still needed to demonstrate an income equivalent to three times their share of the rent and maintain a more positive than negative credit history, among other requirements.

However, in 2023, Governor Newsome signed SB 267, introducing a significant change. This new law allowed individuals with Section 8 vouchers to choose not to have their credit score used as a determining factor when applying for rental properties. Nevertheless, these applicants still needed to provide evidence of their ability to cover the rent through means such as paystubs, bank statements, and positive rental references.

The primary objective behind this new law is to address the loophole that allowed landlords to deny Section 8 applicants solely based on their credit history. The underlying assumption was that those on Section 8 often had poor credit, which this legislation aims to rectify.

Security Deposits

When discussing security deposits, it’s important to address the regulations concerning security deposits for all types of applicants. Prior to July 1st, 2024, landlords had the liberty to charge up to 2 months’ rent for an unfurnished dwelling and up to three months’ rent for a furnished property. However, significant changes are on the horizon.

Starting on July 1st, 2024, landlords will be limited to charging only one month’s rent as a security deposit, regardless of whether the property is furnished or not. There is an exception tailored for what is termed “small” landlords. The criteria for being classified as a “small” landlord are as follows: 1) an individual person or a limited liability corporation in which all members are individual persons and 2) ownership of no more than two residential properties, encompassing a total of no more than four dwelling units available for rent. For furnished or unfurnished properties, a small landlord is allowed to collect up to two months’ rent as a security deposit. It’s worth noting that members of a trust are regarded as “individual persons” in this context.

Personal Micro-Mobility Devices

Electric bicycles (ebikes) and electric scooters have gained immense popularity. In 2022, ebike sales in the US skyrocketed, reaching a staggering $1.2 billion in revenue. These remarkable vehicles are powered by lithium-ion batteries. However, it’s important to acknowledge that lithium-ion batteries have garnered a negative reputation, and for good reason—they pose a fire hazard when mishandled. Fires resulting from these batteries can be highly intense and release toxic fumes. Consequently, many landlords began prohibiting the storage of such devices within homes or apartments.

In 2023, SB 712 was passed, prohibiting landlords from imposing a blanket ban on these devices. Effective from January 1st, landlords are now required to choose one of the following options:

• Allow occupants to store and charge these devices within the home if certain conditions are met.
• Provide suitable storage for these devices on the premises.

But what are the specific “certain standards” for allowing storage within the home? To be eligible for indoor storage, the device must meet the following criteria:

• It must not be powered by a motor.
• It must comply with safety standards.
• It must be covered by the renter’s insurance policy.

Regarding appropriate storage on the premises, it must meet the following requirements:

• Be protected against moisture.
• Include a minimum of one standard electrical connection per micromobility device intended for storage and charging at that location.
• Landlords are not permitted to charge residents extra for this storage option.

Additional regulations encompass provisions for reasonable accommodation for individuals with disabilities, adjustments to application fees, and alterations for property owners intending to reclaim their residence. In upcoming editions of the newsletter, we will provide comprehensive coverage of these topics. For real-time updates and changes pertinent to rental property ownership, be sure to follow us on social media.