Working from home (WFH) is a type of flexible working arrangement that allows an employee to work from a remote location outside of corporate offices.
Before COVID-19, just 13 per cent of people aged over 18 with a job reported WFH all or most days.
Since the pandemic, however, this trend has shifted significantly.
According to the most recent stats (August 2023), around 37 per cent of Australians are now WFH regularly.
What this means is that there’s a pretty good chance you may have tenants who are WFH in your investment property.
While there are some advantages to having tenants at home, including a decreased risk of burglary and someone being on-site and able to act should disaster strike (like a pipe bursting), there are also increased risks.
Let’s look at a few of these risks and what they may mean for insurance cover…
Increased wear and tear
It stands to reason that if someone is home more often, then they’ll be using the rental more – walking between rooms, opening doors, switching on lights, using appliances and so on.
With the increased use, comes greater wear and tear.
Landlords cannot deduct money from the tenant’s bond to cover general wear and tear, and most residential tenancy legislation also makes reference to reasonable wear and tear and the landlord not having recourse.
Landlords also can’t make a claim against their insurance for normal wear and tear.
This is because wear and tear is damage that naturally occurs over time in an investment property due to use and aging.
It is not caused intentionally, or by neglect, misuse or abuse.
Greater damage
It’s a similar risk – laws of probability wise – when it comes to more damage occurring at the rental.
The more time someone is on-site, the greater the chance of some types of tenant-related damage occurring.
There may also be an increased risk of accidental damage associated with the tenant's WFH.
Say, for example, they get deliveries of heavy boxes and one tear the carpet or gouges a wall.
Your tenants are responsible for any damage that they, their children, their pets and their guests cause.
However, if they fail to make good on their obligation, you may need to look to your landlord's insurance to recoup your losses.
Not all landlord insurance policies provide cover for all types of tenant-caused damage.
Additional fittings and fixtures
Depending on what type of work your tenant does, they may need to install additional fittings or fixtures at the rental.
For example, they may need to install a workbench, more lighting, an extra sink or additional powerpoints.
While most jurisdictions now allow tenants to make minor modifications to the rental (either with, or sometimes without, the landlord’s consent), installing additional fittings and fixtures is unlikely to be considered a minor modification, and the landlord will need to give permission.
If you do give permission, be sure to document any requirements in the lease agreement (such as removing any installation at the end of the tenancy and re-instating the property as it was previously).
If the tenant does not make good or makes the installation without your permission, you may be able to make a damage claim (intentional damage) on your landlord insurance – assuming your policy includes cover for deliberate/intentional damage.
Greater liability risk
A key risk associated with tenants WFH is that of legal liability.
If your tenant’s work means that third parties will attend the premises, then there’s an increased liability risk.
That is, a visitor may injure themselves or have their property damaged while on the premises.
Visitors are not necessarily just clients or colleagues visiting the rental but also delivery people such as couriers or service providers such as the company IT contractor coming to fix a computer.
Landlords should ensure that they have adequate legal liability insurance in the event any person (whether tenant or visitor) is injured or suffers a loss because of something the landlord does or fails to do at the premises.
For example, if the landlord fails to repair a damaged wooden step, a visitor puts their foot through the tread and gashes their leg – and a claim arises.
Pests
If the tenant’s work requires them to store goods on the premises, this could increase the risk of pests and vermin.
Claims for extermination or repairing damage caused by pests and vermin are excluded from landlord insurance policies.
Some goods may also increase fire risk at the property or prevent thorough inspections from being carried out.
Voiding insurance cover
The above risks are discussed in relation to the tenant simply WFH.
By which we mean that they are employed by a business but working regularly from their home (your rental property).
It’s a different story if your tenant is operating a business from the rental.
If your tenant is using the premises to generate an income, then it is likely that this will have an impact on a claim (in most policies this isn’t a standard exclusion).
So, if your tenant tells you they are thinking of operating a business from the rental, then you must let your insurer know and they will decide if they will continue to cover you.
Now if your tenant doesn’t tell you and you’re not made aware of it some other way, then you are likely to be covered for losses from insured events.
Know the risks
Flexible working arrangements including WFH are now options for workers in many fields.
So it’s a reasonable assumption that a number of tenants will be WFH.
Obviously, landlords can’t dictate whether a tenant works from the rental or not (though they can prohibit them from running a business from the premises), but they should be aware of the increased risks and plan for these accordingly.
Guest Author: This article was written by the team at EBM RentCover and was originally published here. EBM RentCover is one of Australia’s leading landlord insurance providers, protecting more than 150,000 rental properties across Australia.
