Landlords hit by surge in malicious property damage

31 March 2016

Victorian tenants have become more reliable when paying rent, but landlords suffered a major increase in malicious damage caused by their tenants in the last financial year, RACV Insurance data has revealed.

RACV General Manager Insurance, Paul Northey said there was a drop of 3.5 per cent in rental default and leave without notice claims in the 2014-15 financial year but malicious damage claims rose 24 per cent to 495.

“The incidence of malicious damage by a tenant has increased each period for the past five years and repairs have also become more expensive,” Mr Northey said.

“Last year the total cost of these claims doubled to more than $3.4 million.”

“We were also able to assist our members with payments of more than $2 million in Insurance claims for landlords whose tenants defaulted on the rent or left without notice.”

“The high number of claims relating to malicious damage by the tenant and loss of rental income demonstrates the importance of screening prospective tenants carefully by checking with referees and past property managers,” Mr Northey said.

Escape of water, which is often caused by a burst water pipe, and storms were the two most common causes of landlords lodging insurance claims. Damage repair for these incidents cost an average $5,461 and $2,159 respectively.

“In total, landlords lodged 2,753 claims with RACV Insurance in 2014-15,” Mr Northey said.

“This reflected a 5.6 per cent increase in the number of claims compared to the previous financial year. However, the cost of the claims increased 31 per cent to almost $15 million.  Against this trend, we received the lowest number of incidents for four years for fire, fusion, falling trees, and public liability.”

Brimbank local government area recorded the most landlord insurance claims for the fifth successive year. Landlords lodged 401 claims in the municipality; more than double that of Casey which ranked second. Over the past five years, claims for rental default and tenant malicious damage totalled 651 in Brimbank, ahead of 297 in Melton and 247 in Casey.

Mr Northey said the RACV data reinforced the need for landlords to protect their investment by having the right type of policy in place and to know what they are covered for.

“In addition to tenants causing damage, landlords should also consider the cost of natural disasters, such as storms, floods and fires and how a lack of adequate insurance cover could seriously impact their investment return,” he said.

Attached: Regional angles, RACV Insurance claims statistics and Tips for landlords.

Top 10 Victorian local government areas for landlord insurance claims

Top 10 Victorian local government areas for landlord insurance claims

LGA

Claims 2014-15

Claims 2013-14

1

Brimbank

401

370

2

Casey

161

163

3

Melton Shire

138

145

4

City of Greater Geelong

131

111

5

Whittlesea

110

87

6

Hume

111

119

7

Frankston

84

89

8

Darebin

90

78

9

Macedon Ranges Shire

79

89

10

Banyule

46

45

(Source: RACV)

Top 10 Victorian landlord insurance claim types and average repair cost

Top 10 Victorian landlord insurance claim types and average repair cost

Claim type

2014-15

2013-14

1

Escape of water

No. of claims: 531

Avg. cost: $5,461

No. of claims: 377

Avg. cost: $4,385

2

Storm

No. of claims: 501

Avg. cost: $2,159

No. of claims: 617

Avg. cost: $2,395

3

Malicious damage by tenant

No. of claims: 495

Avg. cost: $6,908

No. of claims: 398

Avg. cost: $4,481

4

Rental default

No. of claims: 404

Avg. cost: $3,602

No. of claims: 431

Avg. cost: $3,470

5

Leave without notice

No. of claims: 186

Avg. cost: $3,165

No. of claims: 181

Avg. cost: $2,938

6

Burglary

No. of claims: 104

Avg. cost: $3,348

No. of claims: 85

Avg. cost: $3,152

7

Broken glass

No. of claims: 84

Avg. cost: $1,534

No. of claims: 79

Avg. cost: $1,111

8

Impact of vehicle

No. of claims: 74

Avg. cost: $3,263

No. of claims: 83

Avg. cost: $4,176

9

Fire

No. of claims: 68

Avg. cost: $51,356

No. of claims: 81

Avg. cost: $34,086

10

Malicious damage (by other than tenant)

No. of claims: 55

Avg. cost: $6,134

No. of claims: 45

Avg. cost: $4,924

(Source: RACV)

Tips for landlords

  1. Screen prospective tenants carefully. Check referees and past property managers.
  2. Tenants who do not pay the rent can be just as costly to landlords as those who cause damage. If rent is paid late, take action immediately.
  3. Ensure you have adequate landlord insurance which covers against malicious damage and loss of rental income.
  4. Have your property regularly inspected and conditions recorded. If damage caused by a tenant is not recorded during an inspection it may be costly to repair later. Also, if maintenance issues are not fixed, the landlord may face legal liability if a tenant is injured.
  5. Consider getting a high-quality real estate firm to manage your rental property.
     

RACV Landlord Insurance is issued by Insurance Manufacturers of Australia Pty Limited ABN 93 004 208 084 AFS Licence No. 227678. This is general advice only so before making any decisions, please consider your own circumstances and the Product Disclosure Statement before buying. For a copy call 13RACV (13 7228).

Written by Liselotte Geary, RACV Public Affairs on (03) 9790 2717
March 31, 2016