Landlord insurance: Subletting
Subletting is a bit of a grey area in landlord insurance, but we've done our best to clear things up.
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Lots of tenants sublet their home – whether it's one room, several or even the entire place. Unfortunately, when it comes to landlord insurance, the rules around subletting are a little grey.
Many landlord policies include a clause which says your policy won't cover damage if the property is being sublet – but it's not so clear how that works when the landlord isn't aware of what's going on.
What is subletting?
Subletting is when a tenant rents out their room, a spare room or even the entire home to someone else for a period of time, without changing the name on the lease.
This might happen when a tenant wants help with the rent or if they decide to move elsewhere but can't afford to break their lease.
In some cases, subletting happens on a small scale. For example, when people rent out their spare room or even their whole place on sites such as Airbnb, to make a little extra cash.
Why is subletting a problem for landlords?
Subletting might seem harmless, but if you're a landlord, it puts your property at increased risk of damage.
Importantly, subletting might not be covered by your landlord insurance, so not only are you at greater risk of having your property damaged, you might have to foot the bill for any repairs too.
How does landlord insurance work with subletting?
We took a look at four different landlord insurance policies to see what they said about subletting. Unfortunately, things are not exactly clear.
| Brand | What does the PDS say? | What we think it means |
|---|---|---|
 | Landlord insurance won't cover you if:
| The building isn't covered if you're letting your property out on a short-term basis, including Airbnb bookings. You're not covered for damage if your renter sublets the house, or rooms in the house, to other people. You're not covered for damage done by squatters or trespassers occupying the property. |
 | You must have a signed written lease agreement in place for four weeks before the loss or damage occurs. | A written lease must be in place for four weeks before loss occurs for cover to be provided. This would need to include any other people your tenant has staying with them – but not temporary guests. |
 | Landlord insurance won't be valid while:
| You won't be covered if your property isn't occupied by your specified tenant for more than 60 days. You won't be covered if the property is being used as bed and breakfast accommodation – this could include Airbnb bookings. You won't be covered if more than three unrelated adults live at the property. This could rule out many share houses – unless you let Youi know first. |
 | Cover only applies if you and the tenant have a signed written lease agreement which has been in place for at least four weeks before the loss occurs. | You're only covered if you have a long-term lease agreement with your tenant. |
What happens if a subletter defaults on their rent?
If you have rent default cover on your policy, you may be covered if the subletter defaults – but only if you weren't aware the property was being sublet.
Typically, rent default will only kick in if you've held a written lease with the tenant for at least four weeks. However, if the tenant sublets their property without your permission, it's likely the original tenant will still be responsible and you will be able to claim.
If you gave permission to your tenant to sublet, but didn't create a new contract with the subletter, it's unlikely you'll be able to claim.
It's a tricky area so it's best to contact your insurer directly to double check.
What happens if the subletters damage the property?
If you gave permission for your tenant to sublet your property, but didn't create a new lease with the subletter, it's unlikely you'll be covered for any damages they cause.
However, if your tenant sublets the property without your knowledge, you may be able to claim as damage by tenants and their guests is usually covered by landlord insurance policies.
As always, it's best to double check with your insurer. This is a particularly grey area in landlord insurance so we suggest going straight to the source to find out.
Is it time to switch landlord insurance?
When was the last time you had a look at your landlord insurance policy?
We did some research and found a huge $1,143 difference between two annual landlord insurance policies. It really pays to compare so you can find the best landlord insurance for you and your property.
Picture: GettyImages
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