This is a case study in a condo unit that was rented out to a tenant.
The tenant was using an air fryer in the kitchen.
Suddenly, it exploded.
Sprinklers were set off in the 2 neighbour units and they were all damaged by water.
It was a disaster.
Whose responsibility is it?
Obviously, the recovery cost is going to be very expensive.
Who is paying for what?
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Let’s start with the basics first.
Each condo unit consists of 2 parts.
The first part is the standard unit and the second part is everything else.
A standard unit is not what you think it is and it is different from condo to condo.
Generally, a standard unit only includes the ceiling, the walls, sinks and toilets, electrical and plumbing.
Cabinets, countertops and floorings are typically not included as part of the standard unit.
You will have to check the condo docs to find out the definition of a standard unit in that particular condo.
Now, back to our story.
The landlord of the air fryer unit was terrified when she found out about the accident and the extent of the damages.
She is very worried that it is going to cause her a fortune.
Indeed, she is held responsible.
Luckily, she has landlord insurance, with $1 million dollar liability coverage.
We recommend all the landlords in our rental management program to get a $2 million dollar liability coverage.
The insurance premium between $1 and $2 million liability is only around $15 per year, so it is definitely worth that extra coverage.
In this case, there are 2 victim units with water damages.
The condo corporation will fix the things that are defined as a standard unit.
For example, they may replace the dry walls and repaint them.
Let’s just say it costs $50,000 to restore the 2 victim units to standard.
The condo corp is going to send the bill to the air fryer landlord.
Ultimately, the landlord’s insurance is going to pay the bill under the liability coverage.
That’s just the standard items.
What about all the things that are not part of the standard?
For example, the whole laminate flooring may need to be replaced because it is all wet.
Kitchen cabinets may need to be replaced as well.
These will be classified as unit damages and each landlord of the victim units will have to claim their own insurance.
Generally, there is a $1,000 deductible for unit damages.
And this will have to be an expense for the victim landlord.
Sometimes accidents happen and it is not something that we can control.
So it is important that you have the right insurance binder in place to protect yourself.
What about the damages in the air fryer unit itself?
Same thing for standard items, condo corp will fix them and bill the landlord.
The landlord’s liability insurance will pay the bill.
As for the non-standard items, the landlord will pay the deductible and the rest will be paid under the damage coverage.
But this time, the landlord’s insurance may go after the tenant’s insurance because it is the tenant’s fault.
And it should be paid out from the tenant’s liability coverage.
For all our rental management units, we require proof of a minimum $1 million dollar liability insurance from the tenants before we release any keys to them.
You see, a lot of knowledge is required just in handling insurance.
If you are in our rental management program, we take care of it all for you, that includes filing a claim and getting the insurance payout for you when things happen.
Our rental management program is only offered as a privilege to investor clients who made their purchases with us.
If you want to learn more about joining our investor community and build wealth with us, you can schedule a call with me at the link below.