Landlords Frequently Asked Questions FAQ’s

Q: If a tenant “trashes” a property and it costs £1k-£2k to put right, is it worth claiming on the insurance? What will the impact be on the premiums?

A: Not all landlord policies include damage caused by the tenants themselves or people lawfully entitled to be on the premises. So firstly check if your policy includes this important cover. If covered, claiming should not prejudice your position; after all that’s why you pay for insurance. Most landlord policies do not have a “No Claims Bonus” (as with vehicles) so one or two claims should not affect the insurer’s position or your premium. However, if a pattern seems to appear, or several similar claims occur on the same property, alarm bells will start ringing with underwriters who may feel that you are not making adequate provisions to restrict or stop a re-occurrence.

In these situations it is more likely a higher claims excess may be applied at renewal. It’s not uncommon for a standard £100 excess to be increased to £500 or even £1,000 for any malicious damage claim if there is a history of problems. We have even seen an “exclusion” for certain type of claims be applied in extreme circumstances. Having said this, some individual BTL policies do have an underwriting discount applied behind the scenes for “no claims”, so any claim may impact that “hidden” discount, effectively increasing your premium at renewal.

To be 100% sure, discuss actual individual circumstances on your own policy with your provider.

Q: I’m setting up a serviced accommodation business. What insurance do I need for the properties and for the business?

A: By offering this type of letting option, you will be acting as the managing agent and facilities manager as well as the letting agent. Not only will you need to inform the current buildings insurer of the specific tenure and nature of the arrangement, but you also have the additional implied liability of providing the surrounding “professional advice” associated with these serviced lets.

You will undoubtedly need the basic Public and Employer’s Liability as well as Professional Indemnity (Pii) plus the usual Buildings Structure insurance. Please be aware that any insurer covering the Buildings Structure will need to be advised that you are providing serviced accommodation as this is classed as “non-standard” and may need referring to underwriters to ensure full cover will operate in the event of a claim.

This is something we are increasingly being asked to deal with these days. Pii will cover you against the financial impact of giving incorrect advice or making a professional error or omission which then gives rise to a financial loss claim against you. This is completely different to Public Liability insurance (PL) which only extends to cover third party bodily injury or property damage physically caused by you in your duties carrying out your day-to-day business activities.

Q: I want to invest in commercial property. Could you advise what insurance I will need as the commercial landlord, and what the commercial tenant should have? Will my insurance vary according to the tenant’s business?

A:Buying commercial property has essentially the same insurance issues as residential let property. You need to protect the building fabric itself (Buildings cover) for all perils and in addition cover the loss of rent to you following a claim. So if a fire, flood or other insured peril prohibits the tenants being able to occupy the building, your income will be protected.

It is typical for the full annual rent under the lease to be covered for up to a two-year period enabling the property to be repaired or rebuilt if necessary and to reimburse you as landlord for the loss of rent during that period. As well as material damage to the buildings you will also need Property Owner’s Liability, effectively extending Public Liability cover on any matter relating to the actual property itself. In addition, you may also wish to consider adding Legal Expenses cover, which will give access to free legal advice on various aspects of your let business and its professional
interaction with your tenants. Some more expensive policies also include help in recovering rent arrears and eviction proceedings.

Premiums will definitely reflect what type of business is being operated at the property. For example, a metal fabricators with welding being carried out in the building will be rated higher than a basic admin/office let. Even some retail businesses and restaurants are perceived to be a higher fire or theft risk than others so it is always worth asking. Some commercial leases allow to recover your insurance costs; some even are full insuring and repairing leases so this is something to discuss in detail with your solicitor before purchase.

The tenants themselves will need to consider their own position and insure their own business assets. This may include their own contents, fixtures and fittings and any improvements they have made to your building to accommodate their business activities. They also will need to insure either Business Interruption, protecting their own gross profit in the event a claim that prohibits them being unable to trade, or as a minimum Increased Cost of Working, which would pay a lump sum for allowing them to relocate elsewhere in the event of an incident that prevents them from trading in your building. It is not for you as the landlord to provide this additional cover for them. Your lease would (or should) limit your liability on these potential issues.

Q: I have tenants in a first floor leasehold flat. There has been a leak in the flat upstairs which has caused damage in my property, but the upstairs residents are refusing to pay to fix the damage. Can I make a claim against my insurance policy?

A: Yes… however, cover will be restricted to the damage caused by the water to your flat and not extended to fix the actual leak itself. Your insurers would want confirmation that the actual leak had been fixed prior to paying out, as if it had not been fixed what would stop a re-occurrence of the same issues later?

This is a known and well understood problem, and is one of the reasons that Blocks of Flats are insured in their entirety in England, Wales and Northern Ireland. This way, any claim will be made on the block policy which should additionally have as standard “Trace & Access” cover to pay for the leak to be found and isolated, as well as material damage cover for not only your flat but also residual damage to upstairs accommodation and any affected common parts of the building.

Q: As a portfolio landlord with more than ten properties, is there a quick formula I can use to gauge good value on insurance cover?

A: In short, the answer is “no”, there is no magical formula which you can apply. As a landlord with a larger portfolio, time is one of your most precious assets. I would imagine you have also grown to value good professional advice from your accountant and solicitor and their collective advice has contributed to the success of your business. You now need to find and build a good trusting relationship with a regulated specialist professional broker who would be tasked on your account to provide you with the best insurance cover and explain the advantages and pitfalls of the myriad of different policies and schemes for BTL landlords these days.

By going direct to an insurer, there are no advantages for a professional landlord. You would be required to prepare and submit presentations to a variety of direct insurers and review and repeat annually to be assured you were getting the best available terms. In addition, many top property schemes are exclusively operated by scheme brokers like Elite Landlords who have negotiated special additional benefits and enhancements for their landlord clients, which typically would not be available by going to the insurer directly.

Hopefully the above answers give you an insight into some common general questions that come up from time to time. If, however, you have specific questions that you would like answered directly, please feel free to email the team at Elite Landlords who will be pleased to respond to YPN members free of charge.

This month, Paul Absalom of answers your questions about insurance. Elite Landlords is operated by Acorn Insurance Intermediaries Ltd, who have been providing independent insurance advice to landlords for over 18 years.

Acorn operate several national schemes for landlords covering all aspects of insurance and protection for both residential and commercial property, as well as operating individual property cover for BTL landlords and investors. Their experience also

extends to include professional indemnity and management liability, together with public and employer’s liability for tradesmen and contractors, and also all-risks and property developers’ specialist covers.