Many people think that having a home warranty is a great way to cover all the maintenance costs associated with maintaining a rental property for a yearly premium of $400 to $600.
However, there are some things to consider when approaching property management with a home warranty.
First of all, your home warranty was not created for the purpose of covering maintenance costs because your home is being occupied by renters.
In fact, your home warranty policy was originally intended to protect you and limit risks when selling or buying a home. Typically, home inspections are done by buyers who insist items be fixed prior to closing.
The cost of fixing these items can be significant and having a home warranty can help to absorb some of those unbudgeted fees. However, home warranty policies have significant limitations on what they will cover and for how much.
This isn’t a serious problem if you are using your policy only during the sale of your home. However, if you are using your policy to buffer the costs of maintaining your rental property – those limitations could make or break the bank.
Consider instead, using a property management company to oversee the maintenance of your rental property. The call for maintenance and resulting service fees are minimal and without restrictions. You get the maintenance that you need – at the price that is fair.
Additionally, maintenance using a home warranty, requires contacting the national insurance call center for the warranty provider – which is normally located in a different state and time zone.
This call center environment doesn’t support or provide the sincere concern for the plumbing or electrical issue that is happening at your rental property – nor, does it offer emergency service.
Once the information provided is input into the national insurance call center computer, the claim is routed out to the lowest bidding plumber or A/C technician (lowest bidder).
The contract the lowest bidder has with the home warranty company usually requires that a call to us or the tenant be made and scheduled some time with in the next 10 days.
Nevada Revised Statute 118A, commonly referred to as the Landlord Tenant Act, requires that an Owner or Manager respond to habitability issues within 48 hours of being made aware of the problem.
Home warranty companies do not care about the State Law as it pertains to tenants and habitability issues and the warranty policy doesn’t address response time and emergencies or habitability issues.
That means that you are responsible if the home warranty company dispatches a technician outside of the required time and fails to respond within the prescribed limits.
It should go without saying that it is unreasonable to think a tenant will accept being told that someone in another state will contact them about the non-working heating or cooling unit or backed up toilet within 10 days to schedule an appointment when the State Law in Nevada states that repairs to conditions affecting habitability must commence within 48 hours.
What most policyholders don’t learn until the claim is made is that while the air conditioner compressor is covered, the procedure needed and costs associated with changing the compressor are not.
For example, in order to change the compressor, the refrigerant must be removed from the system and can’t be vented into the atmosphere as per EPA rules and regulations.
It must be recaptured and failing to do this if caught will cost the technician his license and a fine of $25,000. This is serious but the technician can recapture the refrigerant for $400 to $600 dollars.
Then a dryer, that will have to be installed to remove all the moisture from the system after the compressor, is installed. The dryer is another charge not covered by the home warranty.
These fees are totally unexpected for something you thought was going to be covered for the trade fee. These extra charges can be anywhere from $200 to $800 dollars and that must be paid in advance.
It has been our experience that preventative maintenance programs work much better than a reactive “fix it when it breaks” strategy does.
A property manager not only manages your property but will also manage risks and his reputation. Allowing the home warranty companies to set the priority when it comes to fixing things that breach the covenant of habitability is only tempting fate.
Property owners and their managers are big targets for those wishing to file a lawsuit. Unfortunately, you are at risk when the home warranty company drags their feet or doesn’t efficiently address the maintenance issue that the tenant is having. If that maintenance issue is something like air conditioning during the summer – you can imagine how that situation could escalate.
Owners are responsible for the property managers legal fees, but the property manager is responsible for his reputation.
We have maintenance vendors that we have worked with for years and they respond when we call them. By removing the “middle man” and not working with a home warranty company – you can avoid assuming any risk for delays in maintenance.