Maintaining a property and ensuring it holds its value over the course of a lease can be a challenge, mainly because that responsibility is split between the owner of the property and the residents. In an ideal world, property operators would keep the property perfectly maintained and up to code, while residents would care for their units as if it were their own property. Unfortunately, as many multifamily owners and operators can attest, that’s not always the case.
For property owners to protect their investment, many turn to implementing tenant legal liability waiver programs to prevent being on the hook for unexpected costs due to damage residents may cause. A tenant legal liability waiver (waiver), otherwise known as a property damage liability waiver, is a legally binding agreement between a landlord and a resident in which the landlord waives the tenant’s liability to the landlord for the damage the resident negligently caused to the landlord’s property. A waiver is not insurance to the resident. But, when the resident enrolls in the waiver program, the landlord waives the resident’s lease obligation to purchase renters insurance. A waiver also protects the resident from the legal and financial obligations to their landlord when they negligently cause certain damage to their unit, and protects the landlord from unexpected costs related to certain resident-caused damage.
How Does a TLL Waiver Work?
TLL waivers are typically executed when residents sign their lease agreement. If a property owner has a tenant legal liability waiver program and the renter chooses not to obtain renters insurance, the renter can be automatically enrolled in the tenant legal liability waiver program at the time of signing their lease agreement. Residents will pay a monthly fee, typically with their rent payment, between $10 to $25 depending on the program.
Waiver programs are backed by specialized commercial insurance policies (“TLL Policies”) that are issued to the landlords to cover the expenses from the damage caused by enrolled residents. Some landlords opt to include a supplemental benefit in their waiver programs for limited reimbursement of damage to residents’ personal property as well as living expenses when the resident has to temporarily move out of their unit due to covered damage.
What Does a TLL Waiver Cover?
Though TLL waiver program prices range, many waiver programs provide the unit owner with up to $100,000 in liability coverage. Depending on the policy, waiver programs typically cover damage to the property due to fire, smoke, explosion, leaks, and other water overflows when caused by a waiver-enrolled resident’s negligence. If a fire or water leak was caused by landlord negligence or a natural disaster, the resident has no liability to the landlord that needs waived and therefore the landlord’s property damage claims will not be covered by its TLL Policy. Generally speaking, TLL Policies will cover the landlord for resident-caused property damage arising from four perils:
- Smoke: Imagine a resident tosses a late-night pizza in the oven and falls asleep. When a cooking accident caused by resident negligence creates smoke that discolors walls, corrodes appliances, or results in the need for deodorizing services, associated repair costs are likely covered under the landlord’s TLL Policy and the residents’ liability to the landlord would be waived.
- Fire: If a resident lights a candle, then forgets to extinguish it before leaving the house and a fire starts, the resulting property damage will be covered by the TLL Policy and the residents’ liability to the landlord would be waived.
- Explosion: While comparably rare, explosions inside rented units do occur. An explosion could occur after lighting a match near a stover burner that was accidentally left on the ignite setting, property damages in this case would likely be covered by the TLL Policy and the residents’ liability to the landlord would be waived.
- Water and other leaks or overflows: Sometimes, a relaxing night in quickly turns into a costly nightmare. If a resident runs a bathtub for too long and the water overflows, flooding their unit and the unit below, the TLL Policy will cover the property damage and the residents’ liability to the landlord would be waived.
While lease agreements may ban candles, firecrackers, space heaters, or unauthorized plumbing repairs, residents won’t always follow the rules. So, in cases of negligence or poor decision making, a TLL waiver can provide rental property protection, covering damages without running into budgetary issues.
What Isn’t Covered by a TLL Waiver?
TLL waivers waive residents’ liability for specific types of damages caused by their negligence. TLL waivers do not waive or otherwise cover residents’ liability to third parties away from the building where the resident resides nor do they cover any injuries to residents or guests. For instance, if someone is visiting a waiver-enrolled resident and is injured in their unit, tenant legal liability waivers won’t come into play since they are specific to property damage.
Standard TLL waivers also don’t provide reimbursement for all types of damage to or losses of the renters’ personal items, even when a waiver program has personal contents reimbursement as a feature. For example, if a renter’s computer was stolen, a waiver program will not provide the resident reimbursement, since a stolen computer did not result from either tenant negligence or one of the specified damage types. If looking for their own insurance coverage, residents should consider purchasing a renters insurance policy (HO4).
Benefits of a TLL Waiver
A TLL waiver provides numerous rental property protections for both renters and property owners. It clearly establishes boundaries and expectations so both parties know what they are responsible for and can therefore take the necessary steps to keep the property safe.
By establishing a TLL waiver program, property owners can:
- Drive total renters insurance compliance and guarantee all units have adequate liability coverage
- Create less effort for onsite teams
- Reduce the risk of disputes over damages and potential out of pocket costs
- Add an ancillary income stream and increase asset value
- Gain peace of mind that they have financial protection for property damage caused by the most common types of resident negligence
By enrolling in a TLL waiver program, residents can:
- Ensure they meet lease compliance requirements
- Gain peace of mind that they are protected from having to reimburse their landlord for the property damage they may negligently cause
The Role of TLL Waivers in Property Management
Working with a TLL waiver program provider significantly reduces property management risk, reduces the need for onsite teams to spend a lot of time tracking down renters insurance compliance, and decreases the overall costs of owning and managing rental properties. Administrative efforts are streamlined, and compliance is guaranteed when you use a TLL waiver program provider like Foxen that automatically enrolls residents and tracks TLL waivers and renters insurance policies to ensure all residents are compliant with their lease requirements. Foxen’s customer support improves the accuracy of your compliance records and helps you at every stage of the journey.
TLL waivers create a safer, more-fair environment for property owners, residents, and property managers. Clear boundaries and expectations are set, and the risk of unexpected property damage costs caused by resident negligence is significantly reduced for all parties.
If you’re looking to protect your property, streamline compliance, and reduce the administrative burden of tracking the status of residents’ renters insurance, schedule a demo with Foxen today.
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