Given the Risks, Owners Should Buy Adequate Insurance
Question: We own a condo and a house that are rental properties. What amount of insurance should we have to protect ourselves if a tenant were to be injured on our property while renting from us?
Attorney Steven R. Kellman replies:
It is very wise to have adequate insurance when owning rental property. A tenant, his or her guests, even a stranger just visiting the property to make a sales call may become injured on the property and sue for thousands of dollars. There are even situations when a trespasser may sue for such damages.
Even if there are no personal injuries, there may be a suit for losses to personal property (due to some defect in the property, lack of security, etc.).
The amount depends on how much protection you need to safeguard your assets and also to genuinely cover a legitimate loss for which you may be legally responsible. In the rental market, $1 million of liability is recommended as a basic policy amount (which, it turns out, is not much more costly than a policy with significantly lower coverage). You may even wish a higher limit, although this is generally not necessary. As you go lower than $1 million, however, you enter the world of increased risk in which one severe claim can put you out of business.
Attorney Ted Smith replies:
It is imperative for owners of rental property to maintain a sufficient amount of insurance. An owner who is not adequately protected can face catastrophic financial problems.
The main categories of insurance are:
* Fire and extended coverage. Lenders will require owners to maintain an adequate amount of this coverage.
* Liability insurance. With the trend toward higher awards against property owners for liability, owners need to take special care to have sufficient insurance protection. The more the better.
* Workers’ compensation. An injured employee is entitled to benefits without regard to negligence of the employer. The owner is required by law to have workers’ compensation for all employees. This is not so only if the worker is a true independent contractor with his or her own coverage.
Many tenants have the mistaken impression that the rental owner’s insurance provides coverage for the tenant’s negligence and personal belongings. Generally, except under special circumstances, the rental owner is not legally responsible for loss to the tenant’s personal property, possessions or personal liability.
Tenants should be reminded up front to get their own renters’ insurance to cover tenant liability and other losses.
Tenant Should Prove Overpayment of Rent
Q: A review of my rental records revealed that I had inadvertently overpaid my rent by $5 per month for a year. I deducted the $60 and attached a note of explanation to the new owners of my building. I then received a Notice to Pay Rent or Quit from the owner claiming I have three days to prove that I actually overpaid the $60.
I feel that it is not my responsibility to compile this data to show proof as it would require a significant cost in time, bank charges, travel, etc. Am I responsible for gathering proof or is the building management? If it is their responsibility and they continue to send me legal notices or pursue an eviction, would this constitute harassment?
Kellman replies:
Generally, if a tenant overpays the rent, he or she is entitled to a credit or refund in the amount of the overpayment. If there was an overpayment, you should be entitled to receive that credit or refund upon your request.
Take caution, however, that a court may side with the landlord’s demand for proof of the accounting based on the long time (one year) passing without complaint. (A court could even rule that you have agreed to raise the rent by implied agreement.)
Proving the payments should be a very simple task. Merely compare your rent payments with the stated rent in the lease. The rent payments may be easily determined from receipts, canceled checks and bank statements or with the rent ledger of the landlord.
In any event, it would not be wise to ignore a three-day notice to pay $60 and invite an eviction lawsuit over this small amount of money. If you can’t resolve the issue to your satisfaction, pay the disputed amount for now, noting the payment is “under protest,” to prevent the filing of an eviction until you can sort the matter out.
Professional Cleaner Can Prevent Haggling
Q: After nearly three years, I am relocating and really need the full return of my $1,100 security deposit. My landlady informs me that I must have the carpets professionally cleaned and that the windows and mini-blinds should be cleaned.
I have no problem cleaning the apartment upon vacating, but I am questioning the requirement to have professional carpet cleaning, and the mini-blinds are so cheap they are sure to break. Are these legal requirements in order to receive a full refund of my security deposit?
Kellman replies:
You will need to leave the unit in a clean and undamaged condition, less ordinary wear and tear, to secure the return of your deposit. That includes cleaning the carpets and mini-blinds. Dirt is generally not considered ordinary wear and tear.
How you get the place cleaned is up to you. The law does not require that you hire professionals to do the job, only that the job is done. If the mini-blinds break during normal use, which includes cleaning, it is not your responsibility because that would be ordinary wear and tear. You should attempt to clean them, but if they begin to break during cleaning, you may simply stop further mini-blind cleaning and note the problem to the landlord.
To remove doubt and controversy, I recommend that you have the unit professionally cleaned with a service of your choice, at a price you are in control of. You will then have documentation that will make it very difficult for your landlord to claim any charges for cleaning from your deposit.
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If you have a question, send it to Rental Roundtable, Real Estate section, L.A. Times, Times Mirror Square, Los Angeles, CA 90053.
