Many residential landlords let out property that they hold a lease on, rather than the freehold. In most cases, this will be where the property owned is part of a block of flats, or a house converted into flats � particularly in seaside towns or where there is a university with large numbers of undergraduates.
It is likely, in such cases, that the head landlord or freeholder will arrange buildings insurance and charge you for the costs involved as part of the maintenance change. It is worth checking on a regular basis that this is all actually in place and that the sum insured is adequate to cover rebuilding costs for the entire property � otherwise an insurance company will reduce the amount of any claim for partial damage (this is called applying average) and you could find that there is insufficient money to cover your losses.
Case Closed?
This is not, however, the entire story. The freeholder’s insurance could well provide indemnity should the property be damaged or destroyed as the result of fire or another �insured peril’ such as earthquake � of which there are more in the UK than you might imagine � storm, flood and so on. What it is unlikely to do is to protect landlords such as yourself in respect of claims made against you for injury by tenants or other third parties where you are legally responsible. Nor will it provide cover for your contents in the premises, such as furnished accommodation or in common parts of the premises.
It is important therefore that you obtain professional advice to ascertain what level of landlord insurance you actually need � particularly that you have adequate cover for loss of rent should the premises be uninhabitable for any length of time and your income therefore ceases.
Business Insurances
In addition to property and public liability insurance, you also need to ensure that you have adequate business insurance, such as employers’ liability � in case you employ cleaners or maintenance staff � as well as legal expenses insurance that can help you to recover unpaid rent, for example, should a tenant default. This insurance can also protect you should you become involved in boundary disputes with neighbours or even legal disputes with tenants or the freeholder.
Some forms of legal expenses insurance can also provide for loss of rent, should you be unable to recover this from a defaulting tenant.
Getting the Right Advice
It is important to seek independent professional advice before making any decision about your property owners’ property and liability insurance as well as your financial obligations. You should always ask your insurance advisers what experience they have of dealing with residential and/or commercial rental property insurance.
NOTHING CONTAINED IN THE ARTICLE SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE. PLEASE NOTE THAT THERE MAY BE VARIATIONS FOR THOSE LIVING IN OR LETTING PROPERTY LOCATED IN SCOTLAND AND NORTHERN IRELAND.
