Lost rent, a form of lost income after a business interruption, is a very common issue that needs to be addressed after disasters like a fire, flood, hail or water damage or a collapsed roof due to snow or hurricane. While a lost rent claim is fairly simple, owners of multifamily housing units, hotels, or even homeowners with rental property can face problems with their insurance company not paying the proper amount for lost rent or income.

This is where a public adjuster can step in. Public adjusters have the knowledge and expertise to properly calculate and settle insurance claims for lost rents. The professionals at Jansen/Adjusters International have developed many expert methods to negotiate lost rent claims and get business owners the settlement to which they are entitled.

1. Extended Period of Indemnity

Most owners of apartment buildings, hotels, or multi-family housing have business interruption/lost rent coverage in their insurance policy. In addition, some policies include an extended period of indemnity which cover lost rents after the reconstruction has finished, giving the owners cash-flow as they bring the building back to pre-loss occupancy.

After a disaster, affected buildings will need to be repaired, cleaned, and/or renovated depending on the damage. This process of claim adjustment, repairs and rebuilding is called the period of restoration. Once the period of restoration is over, the extended period of indemnity can last from 30 to 365 days, depending on your policy. This will cover lost rents and extra expenses for the period set in the policy. Extra expenses can include a marketing and advertising budget for the business to gain new tenants/clients after the disaster. It’s important to be familiar with your policy and know if you have this kind of coverage before disaster strikes.

In specific cases, there may be other coverages that can be used to a business’s advantage. For example, on a property insurance claim that Adjusters International worked on for a major hotel chain in Durango, Colorado, our expert public adjusters were able to utilize loss of attraction coverage. There was a large fire in the area, and while the hotel itself was not badly damaged, it lost a lot of business because of the fire’s effects on tourism in the surrounding area. The loss of attraction coverage in Comfort Inn’s policy entitled the hotel to lost rent payments for the decrease in customers.

2. Transitional Vacancy 

When the insurance company is determining the amount of lost rent to pay out, they will pull vacancy reports for the building to determine the number of occupied units. While hotels have ready access to daily, weekly, and monthly reports apartments, multifamily and other properties with monthly leases generally record vacancies in the rent rolls. These are necessary reports, but they do not reflect the actual vacancy rate of a property since a high-demand property may only see transitional vacancies of two or three days between tenants. A public adjuster can help businesses calculate (and communicate) their actual vacancy rates and avoid penalties from their insurance company.

highest times for transitional vacancies, meaning units that are unoccupied for a brief amount of time in between tenants. Therefore, these transitional vacancies should not lower the vacancy percentage. A public adjuster can help a business owner negotiate vacancy rates based on transitional vacancies and get them a more accurate lost rent settlement.

3. Rent Increases

Typically, the insurance company will use the rent prices that were in place whenever the damage occurred to calculate lost rent. However, this does not account for rent increases. Once a lease has expired, landlords will usually raise the rent price. This needs to be accounted for when calculating lost rent. Public adjusters can help with this calculation by looking at current market prices in the area and historical data from the landlord of past rent increases to prove that an increase was intended should disaster have not struck.

Rent increases can also be applied to renovation and remodeling. Rents will increase after a big facility remodel. In the case of a 55+ living facility in Littleton, CO, Adjusters International was called to help the business that had suffered a fire right before the start of major renovations. The public adjusters were able to quickly navigate the claim so the facility could expedite construction, make the renovations, and increase rents in accordance with the remodel.

4. Saved Expenses

When an insurance company calculates a lost rent settlement, saved expenses are deducted from the calculated lost rents. Saved expenses can mean water, electric, or maintenance costs that the insurance company might assume do not need to be paid if the building has fewer or no tenants. However, this is not always the case.

During a construction or restoration period, electric bills frequently increase as the construction company uses the building’s electric to power their equipment. For water, even if there is no usage, there is still a bill that needs to be paid to keep the water turned on for the building.  

Even if a building is not occupied due to damage, maintenance costs of landscaping, plumbing (between the building and the street), snow removal, parking lots, etc. are still incurred. In addition, if a building was damaged but is still partially occupied, the alarm systems might be off or in repair, meaning business owners will need to implement a fire watch system with a patrol on watch 24/7 for fires or other issues. The cost of all these bills can be quite high therefore it is important to make sure the insurance company does not assume you are saving more on expenses than you are.

Though lost rent claims seem simple, there are many details and nuances that will cost building owners money if they are not aware of them as they navigate the process alone. The Public adjusters at Jansen/Adjusters International, can help landlords and other owners of hotels or homeowners with rental properties negotiate with their insurance company to get an accurate lost rent settlement.

For any questions or to set up a consultation with a public adjuster, contact 800-526-7361 and one of our public adjusters will reach out and answer your questions.

This article originally appeared in Adjusters International/MBC's newsroom.