As a landlord, you are responsible for the maintenance and upkeep of your rental property. Deferred maintenance means postponing necessary repairs and maintenance tasks, and this can be detrimental to your rental property and insurance.
Understanding Deferred Maintenance
Deferred maintenance is a term used to describe when landlords, property owners or managers delay repairs or maintenance that they know are necessary.
There are many reasons why a landlord may choose to defer maintenance on their property. Perhaps they are short on funds for repairs, they don’t want to disrupt the tenants’ day-to-day lives, or they assume the issue will correct itself over time.
While it’s understandable to want to delay certain repairs, it’s important to understand that deferring maintenance can result in a more significant problem or even a safety issue that could have been prevented.
Consequences of Deferred Maintenance
Decreased Property Value: Deferred maintenance decreases your property’s value. It is one of the leading reasons why a property may take long to sell. You can lose tenants too, which in turn hurts your rental income.
Safety Risks: Deferring maintenance tasks such as fixing a broken handrail or loose carpet increases the likelihood of accidents happening. If someone gets injured on your property due to deferred maintenance, you could face legal claims, which could hit you hard financially.
Increased Expenses: Most landlords assume they are saving money by deferring maintenance, but the opposite is true. Delaying repairs often results in more significant problems that require more expensive repairs. In some cases, deferred maintenance can even cause an entire system to fail, forcing you to replace them entirely and deal with a higher repair cost.
Lowered Insurance Coverage: Your insurer could reduce your coverage or decline claims if they determine that damage was caused by deferred maintenance that you failed to handle. Insurance companies often expect landlords to keep up with routine maintenance and repairs to avoid long-term damage.
Legal Issues: If a tenant gets injured or falls ill due to negligence on your part, they could sue you. If you fail to address risks on your rental property, you leave yourself vulnerable to legal liability, which could significantly hurt your finances.
Hindered Tenant Retention: No tenant wants to live in a property with multiple defects or issues that make their life uncomfortable or expensive. Deferred maintenance often results in a decline in tenant retention, which negatively impacts your financial situation.
Relationship Between Deferred Maintenance and Insurance
When it comes to landlord insurance, deferred maintenance affects the coverage you get and the premiums you will pay. Landlord insurance is supposed to protect you from risks related to your rental property but failing to maintain your property increases those risks.
Insurance providers usually inspect a property before providing coverage to identify risks. If the insurer discovers signs of deferred maintenance, they may opt-out of providing coverage or increase the premiums you are expected to pay. This is simply because they don’t want to cover damage which is due to neglect on your part as a landlord.
For example, if you deferred maintenance of your heating systems, which result in fire or causing harm to a tenant, your insurer could opt-out of your claims, and leave you to deal with it all by yourself. Similarly, if your insurer believes that the damage resulted from neglect or lack of maintaining the property, they could deny you coverage.
Conclusion
Deferred maintenance is detrimental to your rental property, legal liability, and landlord insurance. It’s essential to keep up to date with repairs and maintenance tasks to avoid bigger and more expensive problems down the road. Failing to address maintenance tasks can leave you vulnerable to insurance claims, legal liability, and financial instability. As a landlord, it’s important to prioritize repairs to keep your tenants safe and your property value intact.
