Multifamily
The building is one claim. The lost rent is another.
Apartment complexes, garden apartments, townhomes, villas and duplexes. Damage to the structure, displacement of tenants, and the rental income that stops the day the units come offline — each proved a different way, and the owner carries the deductible on all of it.
This page is for the owner of the buildings. Where the property is run by an association, the claim runs differently and any shortfall is met by assessment rather than by the owner alone — those are on the condominium associations and homeowners associations pages.
What you insure, what your tenants insure
Review your policy and your leases for the following
- The buildings, the common areas and the equipment that serves them are generally yours to insure.
- Appliances, cabinets, flooring and window treatments you supplied are generally yours as well, and they’re the items most often left out of a scope.
- A tenant’s belongings are generally the tenant’s, under a renters policy they may or may not carry.
- Improvements a tenant paid for and installed are a separate question, and the lease usually answers it.
- Read the lease alongside the policy. What you owe a displaced tenant, and whether rent abates while a unit is uninhabitable, comes out of the lease rather than the policy.
Loss of rents
On a multifamily loss this is usually the larger number, and it’s the one most often under-documented
- Find the coverage on your declarations page and find its limit. Depending on the policy it’s called loss of rents, fair rental value or business income.
- Most policies pay on the time repairs should reasonably have taken, not the time they actually took. Watch the adjuster’s repair timeline, because that timeline is your rent clock.
- Pull your rent roll as it stood the day before the loss. Unit by unit and month by month, against what actually came in afterward.
- Units already vacant at the date of loss are generally treated differently. Know which ones they were before anyone asks.
- Concessions, month-to-month tenancies and scheduled increases all belong in the number, and none of them show up on a tax return.
- Expenses that kept running are part of it. Taxes, insurance, debt service and the staff you kept on.
- Expenses the shutdown saved come off, and they come off whether or not you count them. Utilities on empty units, turnover costs you didn’t incur.
- Track the months after units come back online while occupancy climbs. Most policies keep paying past the day the first tenant moves in.
- Ask for advances monthly as the loss accrues rather than producing one number at the end. Business interruption.
Deductibles across a schedule
- Find out whether your deductible is a flat amount or a percentage, and what it’s measured against. §627.701
- A percentage of the total schedule of values and a percentage of one damaged building are very different numbers.
- Find out whether it applies per building or per occurrence. On a complex that one line decides more than the scope does.
- Your named-storm deductible and your all-other-perils deductible are two different figures. Know both.
- Check that every building, carport and outbuilding is actually on the schedule of values. What isn’t scheduled generally isn’t covered.
- Windstorm may be written on the same policy or placed separately, with its own deductible. §627.712
What to look for in your policy
- Your named-storm deductible and your all-other-perils deductible, and what each is measured against.
- Whether the deductible applies per building or per occurrence.
- The schedule of values, and whether every building and outbuilding is on it.
- When the limits were last supported by an independent appraisal.
- Coinsurance, and the figure the penalty is measured against.
- Loss of rents or fair rental value, its limit, and how many months it runs.
- Ordinance and law coverage, if you have it and its limit.
- Whether the policy is written replacement cost or actual cash value.
- Any roof payment schedule or separate roof deductible.
- Equipment breakdown, and whether elevators, boilers, laundry and gates are scheduled.
- Vacancy provisions, if a building or a block of units is out of service.
- Whether the property carries flood, and how those limits line up against the ground-floor units.
- Yearly renewals often change coverages in previous policies. Review all endorsement changes yearly.
After a multifamily loss: Dos and Don’ts
Dos
- Say in writing that you’re claiming loss of rents as well as building damage. Reporting the buildings isn’t always reporting the rent.
- Photograph and video every unit and every building before anything is cleaned out or made ready for the next tenant.
- Pull the rent roll as it stood the day before the loss. That snapshot is the baseline for everything that follows.
- Get every roof inspected, not just the one the adjuster climbed.
- Keep notes of which tenants moved out, when, and where they went.
- Get access arranged for inspections while tenants are still cooperative. It gets harder after they have moved.
- Read the lease before you answer a displaced tenant. What you owe comes from the lease rather than from your property policy.
- Tell your tenants to open their own renters claim. Their belongings are generally theirs, under a policy they may or may not carry.
- Watch the repair timeline. That timeline is your rent clock.
- Document delay as it happens. Permits, engineer reports, long-lead materials, contractor capacity.
- Ask for advances monthly as the loss accrues.
Don’ts
- Don’t assume the deductible applies once. On a complex, per building versus per occurrence can change the claim more than the scope does.
- Don’t let one roof be scoped and applied to all of them. Exposure differs building to building.
- Don’t rush units back into service before they’re documented and dried properly. That’s a mold claim in six months.
- Don’t let a unit be cleaned out or made ready before it’s photographed. Once that work is done the proof is gone.
- Don’t hand a carrier last year’s tax return as proof of lost rent. The rent roll is the document.
- Don’t forget the buildings that aren’t apartments. Carports, laundry, mailrooms, clubhouse, dumpster enclosures and fencing.
- Don’t sign a release that closes all claims from the loss to get the building money. The rent claim isn’t finished until occupancy is back.
- Don’t release the flood claim to settle the wind claim. Separate policies, separate proof, separate schedules.
- Don’t give a number you can’t support. An estimate has to survive being read line by line.
This isn’t everything. Your policy carries conditions and duties that apply after a loss, and they’re yours to meet whether or not they appear here. Read your own policy in full. If something in it doesn’t make sense, call me — it’s a twenty-minute phone call about the loss, whether or not you hire me.
These are the ones specific to this kind of loss. Select the link for the Dos and Don’ts that apply to every claim.
The call that matters
If your property has had a loss, call or email me. It’s a twenty-minute phone call about the loss, and I’ll tell you what your deductible is likely to do across the schedule and what to have documented before the first unit is cleaned out.
You stay in control of your claim. That’s the whole point.