The work on my rental property, the one with the burst pipe back in December, is finally done and the insurance claim settled. It was more work than I expected (you can read all about it in Dealing with a rental insurance claim) but the insurance company is finally sending me my refund. Rental insurance claim refund, my ethical dilemma! What would you do?
Rental Insurance Claim Refund:
Las Friday, the field adjuster sent me this email:
A cheque has been issued for $2,338.51 with respect to the hydro, rents and appliances.
We have covered 50 % of the $1,495 lease amount at a rate of 50% for a total of $1,495. This is slightly more than the restoration period of 47 days, but trust that this will compensate them for the additional hydro.
The cost of the appliances and related equipment has been covered in full. We have applied $800 of the $1,000 deductible, crediting $200 for your time mitigating the loss.
Woo-hoo! Can you believe it, they actually paid $200 for my time!! Awesome! They also reimbursed over 50% of the rent!
As mentioned in a previous post, I did make a good business case originally when I asked them to consider reimbursing my tenants for half of the rent. But honestly, I never expected to get that much back!
Additional Useful Information:
My tenant really didn’t lose the use of half of the house. The basement was affected and they do use it as a bedroom, but there are still three bedrooms upstairs and only two tenants! Also the laminate floor was redone fairly quickly so they were able to start re-using the basement much earlier.
Since this all started, my tenant informed me they are planning to move out in the fall or by next spring at the latest. Her daughter is moving to Gatineau on the Quebec side, which is where my tenant used to live, so she wants to move back there.
My “Ethical” Dilemma:
The insurance is sending me the full cheque! And now am I thinking about the refund and wondering what I should do with it!
The claim was handled and processed by my insurance company for which I pay the premiums in full. I could potentially be out-of-pocket by $800, depending on what I do with the refund.
So here are my options:
- Process the refund as intended by the insurance.
- Tenants; $1,495
- Landlord: ($800)
- Recover the deductible amount and give my tenants the difference. Why should they “make” $1,495 for a slight inconvenience while I have to pay $800 out-of-pocket? Somewhere it doesn’t seem right either! This is a business after all.
- Tenant $695
- Landlord: $0
- Or split the “profit” in half with the tenant.
- Tenant: $350 – It should cover the additional electrical expense of running the machines to dry the basement for several days (around $100) and a $250 credit towards the rent.
- Landlord: $345 – It would be pure profit on an insurance claim!
I already gave the tenants a $200 credit in February so I will definitely deduct it from whatever I refund them. I am struggling with what is the right thing to do or the right business decision.
Does it make sense for me to even consider giving them the full $1,495 while I would be out-of-pocket by $800?
If they weren’t planning to move within the next year, the decision would be easier. I would do whatever is needed to make them happy, meaning I would give them the full refund. It would be cheaper than having a vacancy. But since I know they are moving out, I am not clear on what I would accomplish by giving them the full refund!
I am leaning towards option “b” but part of me feels like it’s not really my money to keep! Damn ethics!
What do you think? Would it be unethical to only give them a portion of the rent refund or a smart business decision? What would you do?