For many people, the idea of a home in an area of natural beauty and/or historic interest is an attractive one.
However, it can lead to some insurance issues in situations where you start to let it out for holiday use.
A holiday home
Some property owners are lucky enough to live in a property that’s in a highly desirable area. Perhaps it’s by the sea, in a town with lots of historic interest or very conveniently located for say commuting links into the centre of a major city. It’s the owners’ normal home and their legal place of domicile.
Others may have purchased such a property but only use it occasionally themselves for holiday and recreational purposes. The classic ‘weekend cottage’ might come into this category.
In either case, it can be attractive to think about generating some extra income by letting such properties out to others for holiday purposes. This is becoming increasingly popular today, aided by online services which facilitate contact between owners and potential paying visitors.
There is typically no reason why you should not do so but there are a few parties who you may be required to consult as part of the process:
- your local council. Regulations on this subject vary widely but you may need to register with them as a provider of holiday accommodation and you might also need to satisfy their health and safety criteria via inspections;
- HMRC (sometimes just called the ‘Revenue’ or ‘Tax Office’). Your income will need to be declared and taken into consideration as part of your overall tax position;
- your mortgage provider. Some mortgage provisions may specifically ban you from letting your property unless you have a buy-to-let mortgage;
- your property insurance provider – under the auspices of landlords insurance or holiday let cover.
We’ll be discussing here the last point but please don’t forget that the above conditions will typically apply even if you’re letting only part of your property or an individual room within it. That will also be the case if you’re only letting it for a few days or weeks each year (such as an Airbnb rental).
Although it might be hard to believe, the moment you allow someone to stay in your property in return for payment, you have become a landlord. That is a legal definition and is not something dreamt up by the insurance industry.
The moment you become a landlord, any existing owner-occupier insurance protection you have on your property may become invalid. That could be a serious risk and exposure for you.
If you wish to maintain protection for your possessions and indeed your very bricks-and-mortar, you will need to switch immediately to landlords’ insurance.
The risks your property and you personally are exposed to, change when you have paying guests staying under your roof. To take just three examples:
- your tenants may accidentally damage your property;
- if they’re injured on or around it, they may sue you under public liability provisions and the court awards in such cases can be very large;
- relatives, friends and neighbours who might help out from time to time unofficially and without payment, may legally become ‘staff’ by default if you’re letting your property out. As such, you will have employer’s liability insurance considerations too.
It’s certain that everybody hopes that none of these risks will come to pass but unfortunately, you can’t count on that.
If they do and you need the help of your insurance policy to cope, you must be certain that you have cover in place that’s fit for purpose. In the above scenarios, that required cover may be a version of landlord’s insurance.
It might be highly advisable to read Cover4LetProperty’s free guide on holiday letting to find out more. Alternatively, please feel free to give us a call – we will be more than happy to help.