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One in Five Landlords don’t have Required Insurance
This article is an external press release originally published on the Landlord News website, which has now been migrated to the Just Landlords blog.
Part time landlords are posing an insurance risk, as many do not follow all regulations required by law, says new research.
The increasing number of investors turning landlord has caused a rise in insurance difficulties.
7% of adults in the UK are renting out properties to earn some extra money alongside their main salary. They receive an average rent of £678 per month, with landlords in London and the South East making £1,079 and £816 a month respectively. They earn an average pre-tax profit of 40%, after borrowing costs, management fees and maintenance spends.
Insurance group LV= have warned that the increase of landlords in this sector could have accidental penalties, as many are not aware of all the legal requirements.
Homeowners could also suffer, if they are renting out a property they were previously living in, as their mortgage provider needs to be informed, and they may potentially have to remortgage.
Managing Director of LV=, John O’Roarke says: “Renting out a property can be a great way to cover your costs if you are unable to sell or want to hold on to a home and make some extra money from it. But it is not without risk.
One in Five Landlords don’t have Required Insurance
“Landlords not only need cover for any damage to their property, but they also need to think about their tenants and how they will house them if the property becomes uninhabitable, as well as the lost rental income.”
Ordinary home buildings insurance for the property you live in does not usually cover homes that you let. LV= explained that one in five (195) of landlords, over 400,000, do not have the correct insurance for their tenanted properties.
Furthermore, nearly 500,000 landlords have not had their property examined by a gas safety engineer in the last year. This could result in prosecutions and fines up to £20,000.
Almost a third (32%) of landlords have had their rental accommodation damaged, with an average of £1,200 in repairs. Of all these cases, 44% were damaged by tenants, flooding caused 17% of problems, and storm damage affected 8% of homes.
It is not always an investor’s choice to become a landlord, however.
LV= discovered that 55% of buy-to-let landlords never intended to become one. This amount is caused by people having to rent out their old houses, because they want a bigger home; they have to move for work; they’re moving in with a partner; or not they do not want to or can’t sell their property.
The insurance company says that to comply current regulations on rented properties, gas and electrical equipment must be installed and checked annually by a registered engineer. Tenants’ deposits must also be put into a deposit protection scheme, and some local authorities even require landlords to have a licence.
Those who practise as a landlord full time may use a letting agent to manage their property portfolios.
Letting agents often charge for all legislation to be compiled, to vet tenants and organise rent collection.
Despite this, LV= revealed that almost half (49%) of part time landlords decide to manage their properties themselves, but do not have sufficient insurance. This could lead them to a hefty fine if a tenant makes a claim against them, or if the tenant has an accident as a result of the condition of the property. Property owners are liable for any harm a tenant or member of the public may come to through the state of their property.
Landlords can also be responsible for damage to adjacent properties, for example, an overflowing gutter causing water damage to an adjoining home.
The number of liability claims made against property owners has been increasing recently, say LV=, due to a compensation culture within Britain.
O’Roarke concludes: “If you are thinking of renting out a property, you should check the current regulations for letting properties in your area and make sure you have the right cover in place.”1
