I received a phone call from one of my mates in the industry. It was the day after April fool’s day. He said that on April fool’s day he had been out on property inspections and found that a tenant had taken it all.
On arriving at the premises, the Real Estate Agent found that the key did not turn the lock. The tenant had changed the locks on the door. Believing that the tenant had done a runner, he obtained access. As his lawyer, I did not want to know how he obtained access.
His inspection report revealed the following:
• No stove;
• No range hood;
• No dryer;
• No washing machine;
• No laundry tub;
• Curtains missing;
• Missing light fittings
Yes, the tenant had taken the lot. They had not only moved out their own stuff but had taken a whole pile of the landlords stuff as well. They not only abandoned, but they had taken.
The agent rang his property manager to advise of the fact. She would not believe him, thinking that it was an April fool’s joke. He pleaded for some period of time before she actually believed that this was no April fool’s joke.
As funny as this seems to the outsider, it was no joke to the landlord. Not only did the tenant leave in arrears, leave the place in a mess, but had depreciated the asset. Thankfully, the agent had talked all of his landlords into getting landlord insurance. The insurer payed:
• For all rent in arrears;
• The rent for the vacancy period;
• The replacement of all the white goods; and
• The fixing up of all damage to the property.
The landlord is now laughing. Not only is the place decked out, he can commence to claim for the depreciation on his tax.
This is a timely reminder of why landlord insurance is absolutely vital to any person who is renting out their property. Do we think the agent has a responsibility to advise on landlords insurance. Yes!
Insurance is a financial product and can only be sold by persons who have an Australian Financial Services Licence or is an authorised representative under an Australian Financial Services Licence. This means that agents are not permitted to sell the insurance or to provide any advice as to what products should be taken. Nevertheless, we believe it is encumbrance upon the agent to advise their landlord that they should obtain insurance.
Real estate agents have a duty of care to ensure that a landlord’s property asset is protected. The principles set out in Donoghue and Stevenson, state that the real estate agent must take all reasonable steps to avoid any harm which they could reasonably foresee. It is foreseeable that a tenant may do damage to a landlord’s property and may not pay the rent. The only reasonable steps in relation to preventing any damage which could occur from this consequence is by taking out appropriate insurance. Hence, we believe it is a reasonable step that an agent must take to avoid the foreseeable harm that a tenant could bring to a property is to recommend the obtaining of appropriate insurance.
To give you insurance, you should recommend it.
Bailey Compton & the team at Leverage Australia & The Australian College of Professionals.
