Fallen tree on neighbor's house.

Most Preventable Property Losses for 2018, Part 2

By BreAnn Stephenson

At ALPS we see multiple property claim submissions each day. Some of the losses described within those submissions aren’t avoidable, like hail damage. However, many losses we see are preventable, and to our dismay, those types of losses, if with a few subtle variations, happen over and over again. So, is there any silver lining? Yes! Because of the data we’ve collected, we can anticipate the types of property losses you might experience this year and hopefully help you avoid them altogether! Let’s explore the final three of six most common property losses we see and what you can do to avoid them in 2018. (And hopefully, every year after that!)

Note: This is the second part of a two-part article series. Be sure to check out Part 1 HERE!

Common Loss #4 – Tenant Damage

Can you envision your “perfect tenant”? I would be shocked if you didn’t have a fast answer to that question. Many of the claims that we see involve tenant-caused damage, whether an unintended event like a cooking fire or malicious destruction of property when someone is evicted. Placing the best tenant possible is one of the best ways to reduce unnecessary losses at your property overall.

In the News

2018 started with a nasty surprise for one landlord. In January, Selina Murphy was alerted to her rental’s condition by the electrician she hired to do repairs in the unit. The shocking damage included multiple holes in the walls, cigarette butts littered throughout, drug paraphernalia, piles of dishes, clothes and children’s toys. Amongst the belongings left behind there was an even more disgusting surprise – feces throughout the house and on the walls. The biggest problem for this landlord is that she is now left with an estimated eight to ten thousand dollars of damage and almost no hope of recovering it.

A displaced renter could not only damage your investment, but may also come after you personally if you or your property manager don’t take great care during the tenant selection process. Though an extreme example perhaps, one of the most tragic poor tenant selection stories to come out of 2017 took place in Washington state where a couple was suspected of arson and murder after allegedly setting fire to their former landlord’s home. A background check of one of the suspects revealed a long criminal history involving violent behavior and a 2014 arson conviction.

Types of Preventable Tenant Damage We See Often

The most common types of tenant-caused losses we see are three-fold:

  1. Cooking Fires: According to the National Fire Protection Association, the long-standing leader for home structure fires and home fire injuries, as well as home fire deaths is cooking. Many of the reports we see indicate something cooking on the stovetop was forgotten when the tenant was either distracted by other activities in another room or fell asleep. Some reports also detail tenants being unable to put out a grease fire which then becomes uncontrollable.
  2. Wear-and-Tear: A normal amount of wear-and-tear is to be expected from the ordinary course of living, so you should be fully prepared for a carpet cleaning or fresh paint between renters. The cost of small repairs is usually taken care of through the security deposit or simply as a cost of doing business. “Wear-and-Tear” is typically an industry-wide exclusion in property policies.
  3. Damage During Eviction: Not only do we see wear-and-tear type of damage with evictions, but when a tenant is “forced out” of their home, they may do extreme physical damage to the property such as punching holes in walls or destroying sinks or the toilet. We’ve also seen items of value taken out of the house such as large appliances, fixtures and even the water heater and furnace! Intentional damage done by tenants is often not covered in property policies.

How to Place the Best Possible Tenants in 2018

Placing your best tenant will take some legwork. Every contact with a potential renter can tell you something about their character and how they may treat your property. Always do your due diligence with background and credit checks, making sure to verify any information your applicant submits. Or, if you have a property manager performing this task, be sure you have a detailed grasp of their tenant selection process.

Related Reading

Check out the “Tenant Relations” category for more great information on placing and keeping your best tenants!

Common Loss #5 – Trees

Trees are beautiful additions to your property’s landscape that can improve its value and curb appeal. However, if you don’t take steps to maintain your trees, they can do some serious damage to your investment. Losses from trees cost real estate investors tens of thousands of dollars each year, some of them reaching $30,000 to $70,000 – or beyond. It also goes without saying that large heavy objects falling on people can cause serious injuries.

In the News

Strong winds gave a family a strange Christmas “gift” on Christmas Day, 2017 in Montgomery County, Maryland: a gas leak. Luckily no one was home when a tree fell on the house, damaging the gas meter. However, no one was able to return to the house until the meter was repaired.

Just last week, a large tree rendered an Anaheim, California family’s home unlivable. Five people were awoken to a loud crash as a large tree branch snapped and pierced the roof, just missing the homeowners’ bedroom. Thankfully no one was injured, but the tree did break through the waterline in the house, causing serious water damage. The residents won’t be able to return until all repairs are made.

Types of Preventable Tenant Damage We See Often

Tree damage isn’t necessarily reserved to one time of the year, but we do see an increase in losses related to trees during storms. Winter storms can cause branches to break under the weight of ice and snow and spring and summer storms can blow trees over if the ground becomes over-saturated. Live trees aren’t immune to being damaged in a storm, but if you fail to prune dead branches or cut down a dying or dead tree, you increase your likelihood of a tree loss exponentially.

How to Keep a Tree from Crushing Your Investment Goals in 2018

  1. Make sure you or your property manager are checking your trees on a regular basis.
  2. If you discover any visual signs of damage including dead or falling branches, deep cracks or missing bark, damage to the trunk, mushrooms or other fungus growing on the tree, or the tree is beginning to lean, have your trees looked at immediately by a licensed and insured professional so the appropriate steps can be taken to prevent property damage or an injury.

Related Reading

“5 Signs You Have a Tree Problem”

“Is It Covered: Trees, Shrubs & Landscaping”

Common Loss #6 – Liability

Liability losses can include a variety of types of property damage and injuries. Fortunately, you can reduce your risk of damaging someone else’s property or the negligence that precludes an injury to almost zero through mindful maintenance and a swift response to correct safety issues brought to you or your property manager.

In the News

Reality got a little too real this January when Joe Gorga, star of “Real Housewives of New Jersey”, who was sued for a slip and fall on ice at a rental property he owned. One of Gorga’s tenants claimed to have fractured his arm in a fall back in 2015 and finally filed a suit because Gorga “wasn’t responding” to him in regards to the incident.

About the same time Gorga was getting his court summons, a Portland judge was ordering landlord Sulan Chau to pay $510,000 in fines for multiple violations including obstructed exits, inadequate fire doors, bed bugs, no working smoke alarms and leaking pipes. It’s the largest fine since the city formed a housing safety office, but Chau was lucky that no one was seriously injured as the building had been unsafe for years.

Types of Preventable Liability Losses We See Often

The most common type of liability loss we see reported are slip-and-fall accidents. Some of these reports follow a pattern of eviction-followed-by-lawsuit. However, many legitimate injuries have been reported and range from broken bones, to paralysis, even death. Slip-and-falls have been caused by steps in need of repair or absent handrails. Water-damaged ceilings have lead to head injuries, and one investor had a tree fall on, and kill, an unfortunate passer-by.

How to Avoid a Lawsuit in 2018

  1. Implement a scheduled maintenance plan for every property, or if you have hired a property manager, be sure they verify each inspection and document the details of the items inspected during their visit. Having photos of the inspected/safe property may help your case if you are sued.
  2. If any hazards are discovered during an inspection, be sure they are fixed as soon as possible. Advise your tenant how to be safe until the repair is made (put up a sign, block off the unsafe area, etc.).
  3. Respond promptly to any tenant communications about unsafe conditions.
  4. Utilize the Seasonal Maintenance Checklists in our Resource Center to help you stay on track in mitigating the most common risks of each season.

Related Reading

“Pools, Decks & Trampolines – Are These Amenities Worth It?”

“Is It Covered: Liability for Non-Covered Items”

Won’t Insurance Cover These Losses?

The quick answer is…maybe. While insurance is an important part of your risk mitigation plan, it typically doesn’t cover every type of loss, and each policy is different. Tenant damage that is unintentional may be covered while damage done intentionally is typically excluded, for example. It is wise to check with your agent if you are unsure about your coverage. Even if your insurance does help you cover one of these three types of losses, you may prefer to avoid the following expenses or hardships by taking the proactive steps above. You can avoid:

  • Having to pay a deductible
  • Having to pay additional interest to a lender
  • Lost profits due to an extended renovation schedule
  • An injury to a tenant, their family or a guest at your property
  • A lawsuit
  • The loss of your investment
  • Stress and loss of sleep

Wrap Up

As we’ve discussed, some of the most common losses and damage we see to investment properties are also the most preventable. With a little planning and effort on your part 2018 may just be your best yet!

Do you have a written plan to help you avoid losses at your properties? How do you stay on top of your routine maintenance to avoid liability issues? Share your insights with us in the comments section below!

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