Tenants and landlord Insurance

Tenants and landlord insurance are two of the fundamental elements defining your role as a buy to let property owner.

Tenants, of course, provide the essential income to your business by way of the rent they pay. Landlord insurance is there to safeguard and protect not only the physical assets represented by the building and its contents but also various threats and liabilities that might undermine the success of your enterprise.

So, let’s start with those tenants.

Making your property fit the tenant’s mould – our top six tips

Certain tenants – or tenant market segments, to put it more formally – are going to find one type of property more appealing than another.

Yes, location is always likely to be the major factor. Even so, several other factors might prove to be crucial to your obtaining the type of tenants you wish, rather than those you feel forced to take. Here are some pointers on matching the ideal tenant to your particular let property:

• match your décor to your tenant aspirations. Having a great property in a great location that you hope to let to, say young professionals, might prove to be difficult to let if your furnishings are of poor and rudimentary quality. Young professional tenants might be a premium sector in terms of potential for income, but they are also likely to be more demanding in terms of comforts around the property and the quality they expect to see in return for their rent;
• put yourself in your target segment’s shoes. For example, if you hope to let to families, then your property may need a garden or at the very least access to adjacent (safe) playing areas. Your furnishings should be reasonable quality and above all robust, as younger children can be unforgiving on things such as furniture. Remember also that families will be looking even more closely than others at safety around your property. Open staircases and the like might be a big turn-off to this target market segment;
• be realistic about your target market segments. Setting high expectations for income levels and high net worth tenant segments may simply lead to disappointment if, for whatever reason, your property is not of a type or in a location that such tenants will be looking for;
• think through your advertising channels. Certain groups in your marketplace may be much more inclined to look at some types of publication or websites, than others. Advertising through unsuitable channels is likely to lead to you never seeing the types of tenants that you are interested in;
• consider the lifestyle expectations of potential tenants. As touched on above, relatively high-income market segments may place a premium on a designer look-and-feel. Groups at more modest average earnings levels may be placing far more emphasis on the flexibility of the accommodation being offered and its practicality. You should design your property and decorate it accordingly;
• be aware of your location when defining your target tenants. Of course, there is nothing much you can do about your property’s location once you’ve purchased it but remember that high-street areas close to shops, restaurants and bars might be popular with groups such as students and young professionals. By contrast, they might be seen as being too noisy and potentially disruptive for families and older renters who might prefer rather more peace and quiet.

Steps to take before a tenant moves in

There are obviously a number of things that, as a landlord, you will want to see to before your new tenants move in. Typically, these are likely to fall into three broad categories – namely:

1. matters related to the preparation of the property itself;
2. your selection and vetting of tenants; and
3. the legalities of the tenancy and documentation of the respective roles and responsibilities of your tenants on the one hand and the landlord on the other.

More specifically, you are likely to be focussing on some or all of the following matters:

• in a competitive letting market your property will need to look attractive to potential tenants – so a fresh coat of paint and a thorough cleaning may make it easier for you to find suitable people;
• take considerable care in following up references and carrying appropriate background checks on your tenants. It may also be a good idea to keep a photocopy of their passport or driving licence. In England you must carry out Right to Rent checks;
• it is always sensible to have a full and detailed inventory – with photographs where appropriate – of your contents, fixtures, and fittings. This should be signed by your tenants and don’t forget to date the signed inventory, so you have a clear and unambiguous record of the condition of your property and its contents at the start of the tenancy. Give a copy of this document to your tenant and keep a copy yourself in a safe place;
• in addition, though, any property that is being let out to tenants needs to conform to certain health and safety standards and it must be well maintained. This is in your best interests, as any injuries your tenants or other members of the public may suffer due to some badly maintained element of your property, might result with you in court being sued for damages;
• remember that you have a legal obligation to have gas and electrical appliances professionally and appropriately serviced regularly. You must also have copies of operating instructions available and provide relevant certificates;
• there is little from escaping the fact that from time to time you may experience trouble with your tenants. While this may not happen very often, as a landlord you should perhaps always prepare for the worst so that you can best protect your own interests;
• don’t forget that any security deposit (against breakages and damage) you ask your tenants to pay must be held for safekeeping by an approved third party under the Tenancy Deposit Protection (TDP) scheme. This is designed to protect both you and your tenants’ interests should there be a dispute at the end of the tenancy about damages to your property.

Get the most suitable landlord insurance

Also known as buy to let insurance, landlord insurance is purpose-designed to provide the protection needed not only by the bricks and mortar of your let property but also the liabilities and other risks you may encounter as a landlord.

It is for that reason that the core elements of practically any landlord insurance policy are likely to cover building insurance, contents insurance, landlord liability indemnity insurance, and compensation of loss of rental income (in the event of an insured incident which leaves the property temporarily unlettable pending repairs and reinstatement).

But there is a further quirk you might encounter with some landlord insurance policies – and, given the impact it might have on the pool of potential clients from which to choose, you might want to pay it some attention.

The issue arises because some insurers specifically exclude cover for landlords if their tenants are drawn from particular social groups, such as students, the unemployed or benefits claimants.

You will be pleased to note, therefore, that none of the landlord insurance policies arranged by us here at Cover4LetProperty contains such exclusions. The days might also be numbered for those insurers that persist in doing so, following a court ruling on the 1^st of July 2020. A decision in York County Court clarified the extent to which landlords may be discriminating against certain classes of tenant – in this specific case, disabled tenants – and ruled that such discrimination is unlawful, explained the housing charity Shelter on the 14^th of July.

As a landlord, of course, you are at liberty to pick and choose your tenants – in a non-discriminatory way. If you have certain tenants which you think might pose a greater risk of loss or damage to your property or business, there are other ways of protecting yourself.

By choosing landlord insurance policies that specifically address such risks or by choosing additional specialist cover, for example, you may guard against incidents of malicious damage, public liability claims or perhaps, in certain circumstances, disputes about rent arrears, evictions and attempts to recover unpaid rent from tenants who have fled.

For the avoidance of any doubt, you might also want to make clear to your tenants that, regardless of any insurance cover you might have arranged, they remain responsible for loss or damage to their own possessions and for any personal injuries they suffer for which you bear no liability. Clarifications such as this might be written into the relevant tenancy agreements.