RENT to RENT Insurability

Rent to rent leases are becoming more common but as their popularity spreads property owners must be more careful of the insurance exposure these options create.. It is easy to see the appeal… as a landlord you hand over the property for a fixed term under a lease arrangement for a known and guaranteed monthly payment… Equally the benefits are also there for the Rent to Rent company who now have access to a fully up-and-running residential let property and can re-let it at the market rate taking the profits on the differential…. But as with everything there are the legalities to take into account.

There are two distinct areas of concern for YPN landlords to consider…

• The potential insurability issues between the Rent to Rent Co and the Property Owner.

• And full disclosure of all correct material facts to Insurers.

As far as we see it the property owner (landlord) should continue to insure the building’s fabric and property owner’s liability for their property during the whole period that they lease out their property. Why?, if there was a total loss fire claim and the insurance was arranged by the rent to rent company (in their name) they could hypothetically arrange a “cash settlement” in lieu of rebuilding the property.. what guarantees would be in place to ensure the property actually got rebuilt and the rent to rent company just didn’t walk away from the deal with the insurance proceeds?.. You would also want to have an input into how, when and what was replaced, after all it is your investment.

More importantly is managing the disclosure aspect to insurers… If the Insurance company rated the premium for a standard working family and then subsequently the rent to rent company replace the single tenancy with a multi tenure let possibly to fully assisted housing benefits tenants, or even let out as a refuge or an asylum seeker HMO this would be classed as not providing “accurate and complete information” and may result in any valid claim not being met.

It is vital that there is a reporting mechanism in place that allows the Rent to Rent company to inform the property owner of the classification of tenant occupying the property and that this information is updated regularly, at least annually at renewal of the insurance policy or more often as and when the situation at the property changes during the year.

The Rent to Rent company need to be aware that they are responsible for the contents of the property. Ideally they would take out a stand-alone contents policy including related property owner’s liability to cover any landlord’s contents in the property. Our advice would be to let the property on an “unfurnished” basis so there is no ambiguity on any related contents liability. You would not want to be responsible for the Rent to Rent Co not adequately checking loose carpets and trip hazards which might give rise to a public liability claim form any tenant or visitor to the property… After all you generally will not have any direct access to your property during the lease period.

You should ensure that the Rent to Rent company has valid Professional Indemnity insurance. This is something you as the property owner/landlord will be able to claim against should you suffer a financial loss due to the advice or actions taken by the Rent to Rent company that is taking over control of the property.

In addition the landlord may wish to include full legal expenses cover on any property that they give up to such a Rent to Rent arrangement. Full legal advices would then be covered which could also be extended to include loss of rent to the landlord or recovery of the property in the event of issues with the Rent to Rent agreement.

Paul Absalom Tel: 0345 040 0273