This article is about tenants, builders and surveyors. One of them behaved badly when an insurance claim occurred and it’s not who you think. Insurance fraud is a huge problem for all of us. This article gives you some clues as to how you can avoid getting caught up, and caught out, when someone thinks it’s OK to commit fraud.
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Leaks can be a real drag
A last minute call before Christmas comes from a client in a mini panic because the client facilities at their studio have got pools of water where it shouldn’t be. The area has to be sealed off because of the leak and the business might have to close, albeit temporarily, if gets any worse.
This is a straightforward issue for us, yet it could be the first time a client is going through this scenario and prompt assistance and advice is what they need. We provided the reassurance that we promised, confirming that the damage to their property was covered. However we instructed them to contact their landlords insurance people because the leak had not sprung from nowhere. It was likely that both insurers would need to be involved. This is quite common and, in this case, a managing agent handled insurance affairs for the landlord.
Property Manager or Mangler?
After a fashion, I received another call from the client explaining that the property managing agent did not want to offer much assistance. They simply said “the builder must be responsible”. I reminded the client that their landlord had cover for investigating leaks, which had become clear when we checked their insurance provision at the beginning. Armed with this information the client/tenant felt confident in contacting the managing agent and pressing their point home. Subsequently, a surveyor arrives and determines that a pipe has not been correctly sealed, causing water to leak and bubble up through the flooring. Luckily it was water rather than waste that leaked, so the damage wasn’t too messy.
In the ordinary course of things, this would have been simple from here on in. The landlord’s insurance pays for the tracing of the leak and the builder repairs the pipe they installed defectively and the client has insurance to repair the resultant damage to their flooring, etc. The managing agent had other ideas.
Why do people think it’s OK to to defraud insurers?
The managing agent contacted the tenant and asked them to pay for the surveyors invoice. When they refused, because it is not their responsibility, the property managing agent said “completely off the record, it will be much easier to do business with us if you tell your insurance company that this was an uninsured part of the landlord’s policy, or write a letter confirming that there were more damaged areas than was actually true”. They wanted to recover the cost of the surveyor without resorting to their own insurance. Or rather, the landlord’s insurance. This seems daft because it’s not their insurance to worry about. It’s the landlord’s! Doing their job properly means presenting insurance claims to insurers in order for them to be settled promptly, fairly, and keep the premises in good shape.
What we know is that this happens all too often. Regrettably, property managing agents have to have their fingers in the landlord’s insurance pie, and they do deals with insurance companies, not always with the landlord’s knowledge, that means that they get paid extra if they do not make too many claims. This is on top of the income they receive for managing the insurance, which is paid to them by the insurance company and allows them to charge the landlord less for the overall management of the property. To landlords this is either something they are unaware of, or dressed up as a good deal. However, they don’t seem to realise that it is going to cost them money in the long run if the property is not well looked after.
Surely the managing agent should be looking after the property rather than trying to earn money out of the insurance that they don’t even pay for. People find it hard to believe that this happens, yet property managing agents seem quite willing to hide the commissions they receive from their clientele and mess up claims situations when it suits them. At the end of the day they always blame the builder or the tenant. Who is the landlord going to believe?
Always check the insurance arrangements of a premises you are about to buy or lease, because you will find insurance history can paint a different picture to the particulars you were originally shown.
Wrap Up: There are some great property managing agents out there yet there are also plenty of rogues. Accountants have told me that they have recovered many hundreds of thousands of pounds from property managing agents who stitched up the owners of properties they looked after. It’s not just on insurance, they do the same on maintenance issues and when repairs are required. Take a closer look at the bills they are sending and see if you can spot any trend that doesn’t make sense.