This article discusses the implications of short term rental insurance cover when apartments are let using sites like Airbnb.
Question: I’ve been involved in a confusing situation where a sub let (Airbnb) neighbouring apartment caused flooding, which caused water damage to my goods. Should the landlord have short term rental insurance cover?
I’ve recently bought an apartment in a 12 storey building in Melbourne, Victoria. I only received the keys two weeks ago and had no furniture in the apartment other than a mattress as I hadn’t fully moved in yet. I didn’t have contents insurance at the time, as I was planning on getting this when I had furnished the apartment.
A flood originated at the property next door to mine due to a negligent act (tampering with fire sprinkler), which flooded several levels of the property. Water damage has occurred to both my walls and carpets. Wall damage is being addressed under the Owners Corporation insurance, however, the cost to replace my carpets and mattress are on me.
I have subsequently discovered that the next door apartment is being leased to a person (person A), and person A is subletting the apartment on Airbnb. Person B was renting the Airbnb and caused the flooding damage. Person B also happens to have just purchased a property in the same building (confusing I know).
I don’t think I should have to pay for my damaged contents (i.e. carpet and mattress) as I was at no fault. Who would be the liable party – the apartment owner, the leaser who is subletting on Airbnb (person A) or the actual culprit who was renting the Airbnb (person B)? Should there be some type of short term rental insurance cover to pay for the damage?
Answer: We believe the crux of this question is: Who is liable for the damage? There is no clear outcome from an insurance perspective.
We believe the crux of this question is: Who is liable for the damage?
Unfortunately, it is not a straight-forward answer, and there is no clear outcome from an insurance perspective.
From our point of view, however, in this situation, the most logical first port-of-call when seeking damages would be the party who caused the damage in the first instance i.e. the short-stay tenant.
If unsuccessful here, it may then be worth considering the short-stay letting firm, or the property owner who was responsible for leasing the property. These parties may have insurance policies in place that cover their third party liability.
General recommendation when purchasing property
As a side note, we always recommend purchasing appropriate property insurance policy as soon as any property settlement takes place. Once the new owner takes possession of the property, they also take on responsibility for:
- The legal liability within the lot e.g. if a third party suffers an injury the property owner could be held liable,
- Any contents in the lot e.g. furniture, carpets, blinds, possessions etc.
Without the appropriate insurance, a new owner could be left without protection should something happen.
Whitbread Insurance Brokers
E: [email protected]
P: 1300 424 627
This article is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 License Number: 229092 trading as Whitbread Insurance Brokers for further information or refer to our website: www.whitbread.com.au.
Have a question or something to add to the article? Leave a comment below.
Read next:
- VIC: Q&A – Is There A Maximum Number of Tenants Allowed in Apartments?
- Strata & Airbnb: How to stop airbnb in your building
Are you interested in more information about short term rental insurance or more generally, strata insurance or information about strata living in your state or territory? Visit our Strata Insurance OR Strata Information Pages by State.
Looking for strata information concerning your state? For state-specific strata information, take a look here.
After a free PDF of this article? Log into your existing LookUpStrata Account to download the printable file. Not a member? Simple – join for free on our Registration page.
I am sure insurance companies will evolve. Changes are made everyday.
Though as of today, I would expect that the owners insurance will cover for any damage/s caused by their airbnb client, in exactly the same way as if you had your best friend staying over for the holidays and there was a flooding event.
In the meantime, Owners must do a better job of vetting their Airbnb clients until insurance companies catch up.
For insurance companies – I think this deserves a different insurance field rather than lodged under long term renters insurance.
I really don’t see why an owners corporation should be carrying the cost of insurance for damage to common property or another persons private property arising from an individual lot owner’s or tenant’s short term or holiday letting business, which is private profit making use of their lot.
It is not the same as your friend or family coming to stay, it is a commercial transaction that brings compete strangers into the property. In most cases the ‘host’ is not present, which might otherwise reduce the risks of these types of accidents or negligent or malicious damage.
It is a commercial activity and residential apartments and our shared facilities are not approved for commercial use? This is an example where owners as a whole being forced without to carry the externalised costs of an individual’s business activity. It is unconscionable that anyone should expect owners as a whole to subsidise their business activity.
I’d be very interested in other people’s views on this.