Is meth horror overblown?
Are property managers and testers overcooking the meth scourge, or should landlords be really concerned? Chris Hutching reports.
Insurance claims for methamphetamine decontamination make up just 3 per cent of of all landlord claims. Some real estate agencies have used the methamphetamine scare as a reason for landlords to employ their management services.
First National chief executive Bob Brereton recently said landlords managing their own properties were taking unnecessary risks.
He cited work by one testing company showing a high percentage of homes tested positive in Auckland, Wellington and Christchurch, although it was unclear if the findings were at toxic levels or low residues.
Brereton cited a decontamination case costing $20,000. But insurance figures show the most common claims were for internal water damage from leaking pipes and overflows (30 per cent), weatherrelated claims (20 per cent), deliberate damage by tenants (15 per cent), and meth damage 3 per cent.
The data was collected by Initio Insurance for the Auckland Property Investors Association
The insurance cost of meth contamination out of all claims was about 6 per cent.
While water, weather, and deliberate damage claims made up 65 per cent of all claims, they only account for 30 per cent of costs.
Fire made up just over 5 per cent of claims, but cost almost 60 per cent of the value of claims paid.
Initio said the single most common cause for claims was leaking water pipes, especially in older homes where maintenance had fallen behind.
Fires caused by wiring and electronics failure were the most damaging.
One of the most common sources was overloaded multi-plugs and wall sockets.
Property Investors Federation executive officer Andrew King, said
meth contamination was a big problem but only for a few landlords.
‘‘The old limits were low and detected small residues. The new standards will allow more tolerance. Often there’s more harm done through the stress of thinking you have a contaminated house.
‘‘We’ll never get rid of methamphetamine, but we know more about it now and the levels that are toxic,’’ King said.
Meanwhile, Brereton claimed property managers would pick up any problems quicker than landlords because they knew what to look for and kept regular checks on tenants.
He said property managers typically charged around 7.5 per cent of the weekly rent and managed letting the property, maintenance, and early notification of legal compliance.
‘‘It’s too big a risk for first time property investors to take on their own. They need to engage professionals to provide an additional line of defence,’’ Brereton said.
IAG has produced a new guide to landlord responsibilities and ‘‘ is working through insurance policy wording changes to ensure greater consistency’’ about levels of cover available for all homeowners.
Claim acceptance will be based on the presence of contamination, irrespective of whether it was caused through manufacture or use.
The maximum claimable amount for most policies will rise from $25,000 to $30,000.
However, there will be an increase on IAG excesses for methamphetamine contamination claims from $400 to $2500.
‘‘This is to ensure homeowners are incentivised to make efforts to minimise losses by doing what they can to protect their homes,’’ IAG said.
Most contamination claims involve rental properties, and premiums across landlord policies will increase from between $40 to $130 per annum.
Claims will not be accepted for contamination to contents in homes, because IAG said it was too difficult to determine the timing and nature of any event causing contamination.
IAG’s claims costs for meth contamination in the past 12 months were $14 million.
Average home decontamination costs were between $20,000 to $25,000, although could be as small as $2000.
Over the past year IAG, across its brands, has received an average of 60 claims every month.
Costs for detailed testing range from $3000 to $10,000.
‘‘We need to be very clear about levels of cover, and that includes establishing a higher excess, so that landlords are encouraged to vet prospective tenants and monitor their homes rigorously, and that homeowners themselves remain vigilant and take steps to avoid costs associated with contamination,’’ IAG said.
‘‘It is a societal issue and we are looking at providing more awareness on how to detect the contamination and its health effects.
‘‘We are saddened to see the effects of methamphetamine use across our communities, and hope the cycle can be broken.’’