Property owners of multi-family buildings in urban areas all across the country – from Washington, D.C. and Philadelphia through Chicago and Minneapolis to Los Angeles and San Francisco – often choose to live in one of the units in the buildings in their real estate portfolio. These buildings are typically 25 units or fewer—perhaps even a four-unit property where the owner lives in one of the larger residences and rents out the others. In doing so, you become both the owner and tenant of the building with several important insurance-related issues that should be considered.
The first issue to consider is whether you have the appropriate coverage. As the owner, you insure the building and contents (permanent fixtures, machinery) for property and real estate insurance for everything from fire, equipment breakdown, and business interruption to liability risks stemming from accidents that occur in the common areas of the building, such as a stairwell, elevator or courtyard. But what about having insurance to cover your personal contents (furniture, appliances, clothing, computer, etc.) within the unit in which you live? Your commercial property insurance doesn’t cover personal property in your building, just as it doesn’t cover any of your tenants’ personal property. You need a separate homeowners policy to cover your contents and personal liability should someone get injured within your unit.
Moreover, as a property owner and resident of the building, you should avoid taking up the role of “repairman”. Your tenants will be contacting you for repairs and may even ask if you can fix a leak, update a bathroom, or perhaps even install new kitchen tile or replace the countertop after years of wear and tear. You’re right there and you may want to save time and money by doing so if you have the know-how. Or, perhaps as tenants move out and it’s time to “freshen up” the place, you and your “crew” are the ones to put a fresh coat of paint on the walls or resurface the floors. While it may seem economical and convenient, a do-it-yourself posture could end up costing you dearly in the long run, as you would not have the appropriate insurance coverage should something go wrong. It’s wise to hire qualified contractors for performing repairs, renovations and service agreements (even for your own unit!) to mitigate potential issues. When hiring a contractor, make sure to obtain a Certificate of Insurance that specifies that the individual and his workers are properly covered should damage occur on the job or a contract worker get injured.
We offer a City Homes Program designed for small urban multi-family buildings in designated cities across the country. We provide a package product that includes building property and liability coverage, excluding personal contents and personal liability. Contact us for more information.