Insurance Against Squatters

As home prices, mortgage rates and rents continue to rise nationally, the threat of squatting has become a hot-button issue for property owners and landlords nationwide. Squatters can devastate a property, decrease market values and leave homeowners and landlords with massive repair bills, cleaning bills and legal fees that run into the thousands or even tens-of-thousands. This might help to explain why one innovative insurance company recently announced they would begin writing squatters’ insurance policies!

Yahoo! Finance and CBS News recently reported that Proper Insurance Services LLC- an insurance company out of Bozeman, MT, whose primary business model is offering short-term rental liability insurance designed predominantly for Airbnb and VRBO owners across the country (along with various optional enhancements)- recently announced that it will begin issuing squatters’ insurance policies, a first-of-its-kind type of coverage, that cover homeowners and landlords for legal expenses and lost revenue emanating from squatters. The policy, which has no deductible, will be available to landlords for a mere $100 annual premium.

According to their website, “Proper Insurance is the nation’s leading short-term vacation rental insurance provider, with the most comprehensive policy on the market. They protect homes in all 50 states with unmatched coverage for property, revenue, and business liability, customized to include guest-caused theft/damage, liquor liability, amenity liability (bikes, kayaks, hot tub, etc.), bed bugs, squatters, and more.”

Squatting has long been an issue for homeowners and landlords, but rising home prices, mortgage interest rates and rents have created a housing affordability crisis throughout the country but are mostly felt in America’s dense population centers and cities. Two of the many effects of the housing crisis are homelessness and squatting. Any homeowner or landlord who has ever dealt with a squatter can attest to the havoc they can wreak and the frustrations and anguish of trying to remove them from the property.

As has been well documented, the legal process for removing squatters is notoriously slow (especially in the boroughs of New York City) and can take several months or even years. During the COVID-19 pandemic, eviction moratoriums throughout the Country prevented many homeowners and landlords from evicting non-paying tenants and squatters for months at a time. Making matters worse, homeowners and landlords cannot prevent squatters from damaging the property while the legal process plays out. Horror stories abound of homeowners and landlords who obtain their properties back after finally evicting the squatters only to find their property looking like a hurricane hit from the inside.

Many landlords have taken their woes and appeals to their legislatures for action resulting in some states like Florida recently adopting much stricter anti-squatting laws. Our office even previously posted a blog detailing how New York issued a recent blow to squatters’ rights on April 22, 2024, when New York Governor Kathy Hochul signed a portion of the New York State Fiscal Year 2025 (“FY2025”) budget that will change the way “tenants” are defined under New York State law.

The definition updates New York State Real Property Actions and Proceedings Law (“RPAPL”) Section 711 to read that “a tenant shall not include a squatter,” and further defines a squatter as “a person who enters or intrudes upon real property without the permission of the person entitled to possession, and continues to occupy the property without title, right or permission of the owner or owner’s agent or a person entitled to possession.” Section 711 previously read that “A tenant shall include an occupant of one or more rooms in a rooming house or a resident, not including a transient occupant, of one or more rooms in a hotel who has been in possession for thirty [30] consecutive days or longer; he [or she] shall not be removed from possession except in a special proceeding” (emphasis added). The new law extends the time period for tenancy rights to kick-in from 30 days to 45 consecutive days of possession and additionally adds squatting to the definition of “criminal trespass in the third degree”. The bill was passed over the April 20-21, 2024, weekend by both the State Assembly and the State Senate. It is a small change that lawmakers say will have a big impact. Specifically, lawmakers say this change will make it easier for police to intervene in squatting cases instead of owners having to take the squatters to housing court, which can be both expensive and time consuming. The new language establishes that squatters are not tenants and, therefore, are not subject to tenants’ rights or protections after 30 days. The definition of a “squatter” is important because squatters don’t have legal rights or possessory interests. Lengthening the time period for a squatter to obtain a possessory interest from 30 to 45 days (a 50% increase) is helpful to both homeowners/landlords and law enforcement. “It is clear that defendants herein acted within their rights in evicting plaintiffs as plaintiffs were illegal occupants, or squatters, and thus had no property interest in the premises or in its continued occupancy.” Morillo v. City of New York, 178 A.D.2d 7, 13, 582 N.Y.S.2d 387, lv. denied, 80 N.Y.2d 752, 587 N.Y.S.2d 904, 600 N.E.2d 631. “Plaintiffs’ contention that RPAPL 713 requires defendants to utilize statutory remedies, rather than self-help, in regaining possession of the premises is erroneous. In P & A Brothers v. City of New York Dept. of Parks & Recreation, 184 A.D.2d 267, 585 N.Y.S.2d 335, we held that: While it is true that tenants as defined in RPAPL 711 may be evicted only through lawful procedure, others, such as licensees and squatters, who are covered by RPAPL 713 are not so protected…. RPAPL 713 merely permits a special proceeding as an additional means of effectuating the removal of nontenants, but it does not replace an owner’s common-law right to oust an interloper without legal process…. (emphasis added). Defendants, therefore, acted within their statutory rights in ordering the police to remove the plaintiffs.” Paulino v. Wright, 210 AD2d 171, 620 NYS 2d 363 (1st Dept. 1994).

Proper Insurance clearly took note of the national crisis and saw an opportunity to boost their business revenue in a niche market while giving homeowners and landlords some much-needed relief and peace of mind. Purchasing a low-cost squatters’ insurance policy for only $100 annual premium could potentially save a homeowner or landlord thousands in damages and legal fees. The low price combined with a zero-deductible certainly makes considering a squatters’ insurance policy an attractive offer.

Homeowner.com reached out to several high-profile homeowners insurance about squatters’ insurance, only to come up empty handed. As it turns out, insurance companies are very reluctant to include squatters’ coverage with their plans although searches and demand for ‘squatter insurance’ and ‘squatters’ coverage’ are at an all-time high. Proper Insurance Services LLC co-founder Daniel Pettyjohn explained the company’s decision to offer squatters’ insurance policies: “Proper Insurance consistently leads the industry by addressing the evolving needs of short-term rental owners. Our expanded squatters’ coverage reflects our dedication to providing the best and most comprehensive protection available on the market.” According to Graham Anderson, Director of Claims, Proper Insurance “added squatter coverage in response to demand from short-term rental owners”.

Another big potential benefit for homeowners and landlords in buying a squatters’ policy from Proper Insurance is that the premium price is not location-sensitive. As a Proper Insurance spokesperson stated to Newsweek in a June 8, 2024, article, “Proper Insurance’s one-of-a-kind Squatters Coverage is a static rate meaning there is no adjusted premium based on location. It is a fixed rate for all 50 states and the District of Columbia.”

Although squatters’ policies could undoubtedly benefit all homeowners and landlords, Proper Insurance believes they will be particularly beneficial to short-term rental operators. “Squatters often find loopholes in rental agreements, breaking-and-entering a property, or refusing to leave after the booking period has ended at a short-term rental.” With a squatters’ insurance policy, once a homeowner or landlord discovers a squatter situation at their property, the homeowners or landlord would follow a few simple steps to activate their coverage: they would first need to commence an eviction action against the squatter as quickly as possible and keep detailed records of any correspondence with the squatter. Then they would alert Proper Insurance about the situation and present the required documentation through a member portal. “This documentation is essential, as the legal process can vary significantly depending on the state and local jurisdiction” (what appears unclear at the moment is whether the insurance company would then appoint counsel to prosecute the eviction action for the landlord or whether the insurance would subsequently reimburse the landlord for their independent legal expenses).

It is important for potentially policy holders to note that squatters’ insurance is very different thank vacant home insurance, which is offered by some companies- a vacant home insurance policy is designed to protect against losses that occur with a property that has been vacant for typically 30 days or more. Usually when a home is insured as “vacant,” that means all personal belongings and furniture have been removed and the utilities typically have been turned off. It is considered unused. For example, the home may have been sold but a new family is not scheduled to move in for a few months. A vacant home, in most cases, is one in which no one is around to keep an eye on it. So a vacant home policy typically protects against losses associated with theft, vandalism, damage from weather-related incidents like lightning, hail or wind, burst pipes and other incidents that may damage a home when no one is around to check on it for an extended period of time. This varies dramatically from a squatters insurance policy which protects specifically against financial liability associated with someone refusing to leave the property and/or occupying it without the homeowners’ knowledge or permission.

According to data from the National Rental Home Council (“NRHC”), Atlanta, Georgia, is the epicenter of the squatting crisis, with 1,200 homes currently illegally occupied. One squatter in Atlanta was even running an illegal secret strip club our of the property and had to be cleared out by an entire FBI swat team. Dallas, Texas, is the second biggest hotspot, with an estimated 475 homes taken over by squatters.

While Landlord insurance is common, Proper Insurance is currently the only known American insurance company which offers squatters’ coverage. But Graham Anderson is not even sure if other companies will be able to follow in Proper’s footsteps for the time being. “Historically insurance companies – especially large insurance companies – are slow to make those changes” Graham told DailyMail.com. “Unfortunately, state regulations make it difficult for companies to be agile and make changes, even if they want to.” So it might be a while before GEICO, Progressive and State Farm add squatters’ coverage to their bundling policies.