Insurance companies could pursue tenants for unpaid rent once the coronavirus crisis is over, the Insurance Council of Australia has confirmed.
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Around 3000 claims have been made against landlord insurance policies for rent lost because of the COVID-19 downturn as states and territories place moratoriums on evicting tenants facing financial hardship, the council told a parliamentary inquiry on Tuesday.
But under questioning from ACT MP Andrew Leigh, Insurance Council of Australia's head of risk and operations Karl Sullivan would not rule out insurers going after tenants to recover the sums once the crisis abated.
"That is a matter for individual insurers, but they don't have a relationship necessarily with the tenant. They have a relationship with the landlord, so I imagine that is a discussion they will have with the landlord to determine how much has the landlord been able to recoup and can that be offset against any loss of rent claim that's been made," Mr Sullivan said.
Insurance Council of Australia chief executive Robert Whelan said the council was not encouraging its members to chase renters.
"But they are contracts at the end of the day that have been entered into, and the insurers are abiding by those contracts and so too the tenants should be as well," Mr Whelan said.
Dr Leigh said it "hardly seems in the spirit of things though" to try to recover insurance payouts from tenants.
"There's a range of rent moratoriums that are being put in place as a result of COVID-19. Landlords are suffering some of that pain, and are then turning to their insurer, and you're telling me you think it would be alright if the insurer then went back and sued the tenant?" Dr Leigh asked.
"No, what I'm saying is they need to take into account the community expectations and the degree to which they're able to absorb that is really their own individual decisions," Mr Whelan replied.
"That's something that the company must take on board themselves and decide themselves. It is down to the individual companies to make those decisions. We encourage and provide information to them, but at the end of the day it's an individual company decision to make."
Under the insurance policies, landlords are unable to claim back rent reductions negotiated with tenant. Instead they can only get a payout if the tenant defaults on their rent.
Real Estate Institute of the ACT director Craig Bright said it was a "sting in the tail" for landlords.
"My experience is that landlords have been extremely accommodating where they can, being aware of tenant circumstances," Mr Bright said.
"Everyone is in difficult position. The problem is lot of owners have fixed outgoings they can't do anything about. They can get a deferral on their mortgage but it adds to their term and interest. A lot of tenants are in the same boat with fixed outgoings. It shouldn't be seen to be landlords versus tenants."
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The institute was instead encouraging landlords to offer rent deferrals instead of reductions. However in the ACT, landlords are being offered rates rebates if they reduce their rents by at least 25 per cent.
The rebate will be equal to half the amount of the rent reduction, up to a maximum of about $100 per week for the next six months. However fewer than 100 landlords had applied for the scheme.
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