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Landlords, homeowners, and property investors are all likely to feel at least some impact from items making the headlines in recent property news stories.

Let’s take consider a little more detail about just some of those themes.

Do all energy efficiency measures save money after five years?

Landlords may be doubting whether the energy efficiency measures they have installed in their let premises will end up saving money after all, according to a story by Landlord Today on the 11th of October.

Although improved energy efficiency is part and parcel of sustainability objectives, research shows that, for an average mid-terrace property, most such improvements fail to recover their capital cost even after five years.

Some of the costliest energy efficiency measures include:

  • solar panels – on which you will spend an average of £4,800 but save only £1,650 after five years;
  • double-glazing – expenditure of £4,250 but savings of only £850; and
  • boiler upgrade – expenditure of £2,500 to save around £850.

On the other hand, the following measures appear to be highly cost-efficient:

  • simple draught-proofing – spend £3 to save £215;
  • roof insulation – spend £285 to save £500; and
  • wall insulation – spend £400 to save £500.

Internet connectivity should be top consideration for property investors

Savvy property investors should give priority to locations where internet connectivity is strong and avoid investing in properties located in areas where that connectivity is weak.

Emphasising the importance of broadband connectivity hotspots, an article by the Buy Association recently explained that the series of lockdowns during the pandemic and the resultant upsurge in working from home has lent an added premium to homes with excellent connection.

Reliable, daily connection to the internet is no longer just something that tenants and leaseholders will find “nice to have” but is now an essential utility.

Not so grim up North as yields beat the rest of the UK

Once upon a time buy to let landlords might have considered the North of Britain to be a poor choice for investment. Recent research, cited by Landlord Today on the 14th of October, suggests that the tables have turned quite noticeably. The highest rental yields for landlords are these days to be found in the Northwest of England and Scotland.

With average yields across the whole of Britain currently achieving some 4.2%, the Northwest has recorded average yields of 5.4% and Scotland of 5.1%.

Other regions such as Yorkshire and the Humber, the Northeast, Wales, and the West Midlands have also reported average yields higher than the national average – in the range of 4.8% to 4.3%.

Yields in London are close to the national average while in practically the whole of the remainder of the country – the Southeast, Southwest, and East of England – rental yields have fallen below the national average of 4.2%.

Annual house price growth slowed last month

Ever since the easing of lockdown, house prices across the UK have shown an unrelenting and steady increase. That trend may now be slowing, according to the house prices index maintained by the Nationwide building society.

The annual growth in house prices had fallen back to 10% in September, compared with the annual growth of 11% recorded to the end of August – although there was, in fact, little change in the monthly movement of house prices once seasonal factors have been taken into account, says the building society.

Wales and Northern Ireland showed the strongest evidence of increases in average house prices during this third quarter of the year while London performed the weakest.

While house prices have continued a more or less steady rise, average incomes have lagged behind – so making housing affordability a greater challenge. The deposit required by a first-time buyer, for instance, is now around 20% of the current purchase price. That makes the deposit alone equivalent to around 113% of the buyer’s annual income – an all-time high.

In running a buy to let business, any landlord relies on a fundamental sense of responsibility from tenants who will take care of the let property. From time to time, that trust is misplaced or abused and a tenant – or friends and visitors of the tenant – might inflict malicious damage to the property or the landlord’s contents.

For that reason, many of our customers ask whether we cover malicious damage. We are pleased to say that here at Cover4LetProperty, we do indeed include malicious damage (up to set limits as defined in your policy document) as part of our landlord insurance.

What is malicious damage?

The difference between accidental damage and malicious damage is that, with the latter, it is damage caused on purpose – a form of vandalism –examples of which might be smashed windows, broken furniture, holes kicked in walls or doors, graffiti, or even arson.

Protecting your property against malicious damage

It might often be difficult to disentangle instances of malicious damage from the more common accidental damage – since the former involves some element of intent. You will want to avoid disputes with your tenants about whether any damage has been accidental or was done maliciously, on purpose.

So, we offer the following brief tips and suggestions about reducing the scope for disputes and misunderstandings relating to breakages of a type that might sometimes be incorrectly assumed to be due to malicious damage:

  • make sure you take a full inventory of the contents of your property and describe the condition of each item listed;
  • where realistically possible, support your inventory with photographs – this should be relatively simple these days with digital photography;
  • make sure that you or your property agent take an accompanied inventory with the tenants prior to them moving in. Ensure that the tenant signs off against the inventory and your description of the condition of the items. Once again where possible, try to get the inventory and the tenant’s signature witnessed by a third party;
  • accept the reality of life that inevitably there will be some minor damage, wear and tear, losses, and breakages associated with a typical tenancy. When they arise, try to avoid treating every instance as cause for reimbursement and threats to apply for deductions from the deposit. These sorts of minor issues might be better written off as a legitimate business cost and business risk;
  • where more severe damage or accidents arise, make sure that you take a photograph of the problem and make your request for reimbursement to the tenant in writing, providing both before and after photos, and a copy of the original inventory;
  • stay polite at all times and avoid using inflammatory terms such as careless, malicious, wilful, or deliberate – and the like – in your communications.

Some of these basic common sense steps may help avoid conflict and recriminations.

Your local authority may carry out an inspection of any privately rented property under the standardised Housing Health and Safety Ratings System (HHSRS). Inspections such as this are made to ensure that there are no deficiencies in the property or the way that it is maintained, which could adversely affect your tenants or indeed members of the general public.

What is the Housing Health and Safety Ratings System?

The Housing Health and Safety Ratings System (HHSRS) is an evaluation system developed to assess specific risks to health and safety that might arise in any given dwelling.

The inspections and tests cover a number of broad areas relating to the condition of the building itself and its fitness for use as a letting property including:

  • physical issues relating to damp, mould, excess moisture, pollutants, lead piping, or potential for carbon monoxide generation;
  • the adequacy of the water supply, sanitation arrangements, drainage, and refuse arrangements;
  • psychological discomfort including noise levels, security, and overcrowding; and
  • potential for accidents – electrical or gas appliance and supply safety, maintenance of stairs, safety of windows and sanitary fittings, and the like.

In a posting dated the 15th of March 2021, Stafford Borough Council set out details of the 29 specific housing hazards examined and evaluated in an HHSRS – noting that hazards identified as having a serious or immediate threat to health and safety are judged to be Category 1 hazards while those that are less serious or urgent are Category 2 hazards.

Implementation

Following an inspection, your local authority may make a series of recommendations or issue an enforcement notice for work to be carried out to rectify deficiencies in the standards of accommodation offered by the let property.

Under the HHSRS, local authorities have extensive powers which may range from:

  • giving advice on how to put things right;
  • setting a timeframe for repairs to be carried out;
  • prohibiting the property from being used for letting purposes until repairs have been made; and
  • in the worst case, ordering the demolition of the property concerned.

You could face criminal proceedings if you fail to carry out the recommendations of a Housing Health and Safety Ratings System inspection although appeals against the findings are possible.

Your obligations as a landlord

As a landlord, you have a number of obligations relating to the safety of your property – and, by extension, the health and safety of your tenants.

Many of these obligations relate to some of the areas covered by safety inspection and it is obviously in your best interests to keep your property in a well-maintained state, both to ensure that you stay within the law and to ensure that you can attract and retain tenants to your property.

Further reading: Landlords’ Guide to Health & Safety and Landlord Legislation Guide.

If you have a spare room or two in your home, renting out the space could earn you a tidy sum. You would also receive a welcome pat on the back from the government for doing your bit in helping to ease the current shortage of affordable rented accommodation.

An expression of that official gratitude comes by way of an income tax allowance on your earnings from letting out a spare room. You automatically qualify for a tax-free allowance of £7,500 a year (information correct as at October 2021).

You don’t have to do anything more to qualify for the allowance under this so-called Rent a Room scheme, provided you remain the “resident landlord” (continue to live in the home where the spare room is let out), whether you are the owner-occupier or a tenant of the property.

If you decide to earn some extra cash in this way, want to let out a room or rooms in your home, and take advantage of the tax-free allowance, you might also need to give serious thought to some of the following additional implications:

  • if the rental income you receive is more than £7,500 during the course of any year, you may be required to pay income tax on any income in excess of that amount – but qualifying expenses and capital allowances associated with your letting the room may be deducted from your income prior to calculating the tax due;
  • if you have a mortgage, remember that the agreement may contain provisions preventing you from using your property to generate an income (in other words, using it as a business) – and you will, therefore, need to inform your lender of any changes to your living arrangements that may affect this agreement;
  • if you are a tenant of the property, you will almost certainly need the express permission of your landlord before letting any spare room or rooms to tenants;
  • before your tenants move in, you should agree with them the tenancy conditions – for example, how much rent is to be paid, when, whether or not you require a deposit, and how long the rental will be;
  • you may wish to bear in mind that the deposit amount is not part of your income and when your tenant moves out you will have to repay it minus any deductions for breakages – in the meantime, the law requires that any such deposits from tenants are suitably held by an approved third party;
  • if you are renting out a room in your property and also making electricity, gas, and water available to your tenants from your main house supply, then you can pass on the appropriate charges to your tenants for their usage of these utilities – bear in mind that whether you install prepaid meters or work on an estimated usage for your tenants, you can only charge what you yourself paid for the utility and if you overcharge then you may be required to repay any such sum;
  • any home buildings and contents insurance that you have – whether an owner-occupier or tenant – may cease to be valid the moment you become a landlord. You may need to take specialist property insurance which is specifically designed to cover potential risks involved with having tenants in your property, concerning risks arising from your third party or public liability as the landlord. Speak to your insurance provider for clarification.

Although renting out a spare room or rooms in your home may be an attractive prospect for earning some extra cash, remember that there are other important implications also to consider.

The upward trend in house prices continues unabated but there are still ways you can add value to your home. For tenants, too, there are bright spots on the horizon with a promise of further government aid for affordable housing and the removal of financial barriers for those tenants wanting to keep pets.

These are just some of the headlines to feature in the property pages of the media so let’s take a closer look.

How to add value to your home

It takes an average of just longer than four months from first listing a home for sale until completion. But there are a few simple tricks not only to smoothing this passage of time but also increasing the eventual sale price of your home by as much as £40,000, according to an article in Property Wire on the 2nd of September:

  • by taking a closer look at the condition of the walls and around door and window frames, for instance, simply filling in and making good all the cracks you find could fetch an extra £9,000 or more on the value of your home;
  • look after the garden – the outside space has become especially important to house hunters freed from the recent stay-at-home lockdowns;
  • give the place a lick of paint and redecorate in currently fashionable tones and styles – the article suggests you go Scandi with neutral tones, luscious houseplants and splashes of colour; and
  • make sure you’ve tidied up and given your home a thorough spring clean. Failure to do so could knock off more than £9,000 from its value.

Over £8.5bn to be spent on 119,000 affordable homes

A further £8.6 billion has been promised by the government for its Affordable Housing Programme revealed a story by the online listings website Zoopla on the 31st of August.

The new injection of funds is expected to pay for the development of as many as 119,000 new affordable homes. Some 57,000 of these will be earmarked for those eager to get a first foot on the housing ladder by buying their own home.

A further 29,600 will be reserved for social rent. Some 6,250 affordable homes will also be built specifically in rural areas.

Government says ‘’No” to separate fees for pets in lets

In an important note of clarification, the government has made clear that the Tenant Fees Act – which prevents landlords or their agents from charging tenants certain fees – also prevents making any kind of charge for insurance or a special deposit against the risk of damage by pets owned by tenants.

The clarification was given during a written answer given in Parliament by the Secretary of State at the Ministry of Housing, Communities and Local Government, Robert Jenrick, reported Landlord Today on the 8th of September.

In February of this year, we posted reports by the National Residential Landlords’ Association (NRLA) about the government’s release of a new model tenancy agreement for use by landlords that chose to use it and which gave encouragement to those tenants who wanted to keep a well-behaved pet in the home they rented.

Although landlords are not required to use the model tenancy agreement, those that do are indicating their willingness to accommodate tenants with pets.

UK house prices hit record high despite cut in stamp duty break

The average price of a home in the UK reached an all-time high during August, revealed a story in the Guardian newspaper on the 7th of September.

Despite the recent halt to the major part of the Stamp Duty holiday, the average price paid for a house in August increased by a further £1,789 (0.7%) to £262,954, according to figures compiled by building society Halifax.

The story added that prices are currently 9.9% higher than when the housing market first re-opened in June 2020 after the initial restrictions of the pandemic – an average of an extra £23,600 per transaction. This is even though the rate of inflation in house prices has slowed to just 7.1%.

Maybe it’s one of the effects of this period of successive lockdowns, but the seasons seem to be coming around even more quickly than usual. With another autumn now fast approaching (it officially starts on 22nd September), it’s time once again to prepare your property for the challenges the weather will bring.

Here are our tips and suggestions for getting everything in order:

The roof and chimney

  • out of sight they may be but now’s not the time to keep them out of mind – use the remaining daylight hours to thoroughly inspect the roof and any chimneys;
  • look for loose or missing slates or tiles and ensure that the flashing – around the chimney where it passes through the roof, for example – is in good condition;

Gutters and drains

  • the burst of summer activity has provided plenty of debris that has now died down and risks blocking your gutters and drains – threatening a build-up of water during autumn storms which can usher damp into the fabric of your home;

Cracks in the walls

  • cracks and holes in the walls of the property can also be weak points for the damaging ingress of water;
  • make sure to repair and fill any small cracks and holes yourself or contract a professional for bigger jobs;

 … And cracks in paving slabs

  • make sure the walkways outside of your property – the path etc. – are all up to standard so they are not a hazard with snow, ice and heavy rain;

Lag pipes

  • lagging on water pipes will last from one year to the next, of course, but check it to make sure that it is still intact and, so, continuing to do its job;
  • lagging material these days is fitted easily enough if you buy the insulating foam tubing that simply slides over the top of the pipes;

Wooden-framed windows

  • if you have wooden window frames, check them for cracks, blisters, and any bare wood – in the freezing weather of autumn and winter, untreated wood can swell and rot before its time, so make sure to fill, seal, and repaint any exposed areas that need such treatment;

Hedges and bushes

  • still on the subject of keeping your property dry and the damp out, make sure to cut back any hedges or bushes that have grown out towards the walls of the building – the leaves and branches will act as natural conduits for rainwater to penetrate the brickwork or rendering;

Sort out the shed

  • you can save yourself a lot of trouble later on by sorting out your shed so that the tools you are likely to need during the autumn and winter are ready to hand near the front and other things stashed towards the back;
  • so, put tools such as rakes and shears at the front, nearest the door, and pack away summer parasols and deckchairs to the back;

It probably seems to come around with increasingly speedy regularity but preparing your property for the rigours of autumn and winter is well worth the effort. The maintenance helps to preserve the value of your property – and don’t forget that your home or landlord insurance policy will also insist that the building is kept in a good state of repair.

As usual, it has been a busy month in the property world. Here are some of the latest property news headlines that may be of interest for homeowners, tenants, leaseholders and, property investors ….

Government releases new ‘easy to read’ How to Rent guide

An easier to read version of the government publication How to Rent has now been published, revealed the National Residential Landlords’ Association (NRLA) on the 23rd of July.

Landlords are already required to provide tenants with a copy of the guide – ensuring that it is the current version released in December 2020. The new, easy to read edition is intended as a supplement, which landlords are free to issue as and when they consider necessary.

It is now five years since landlords were first required to furnish their tenants a copy of the official How to Rent guide

“Millions” of leaseholders “trapped in unsellable and mortgageable homes”

Leaseholders of millions of flats in low- and medium-rise blocks are effectively trapped in homes that cannot be sold because lenders are unwilling to advance mortgages, according to a story by the BBC on the 1st of August.

Following the Grenfell fire disaster in 2017, high-rise blocks of flats have been required to pass an inspection and gain a so-called EWS1 fire safety certificate designed to give mortgage lenders confidence in advancing mortgage loans on such homes. However, the government has recently ruled that blocks of less than 18 metres in height would not require that certificate and can be presumed safe.

Despite research conducted by independent experts who concluded that there is “no systematic fire risk” in blocks less than 18 metres in height, mortgage lenders are still adopting a zero-risk approach on such property – with the result that flats in those blocks are effective unsellable.

The BBC’s report estimates that as many as 3.2 million flat owners have been left in this predicament.

UK Property Market Outlook: 9 August 2021

In its property market outlook published on the 9th of August, Property Wire focussed on the present imbalance between supply and demand, predicting that the disparity is likely to reach its peak this summer.

Demand has been fuelled by a release from successive rounds of lockdowns and the realisation on the part of many buyers that they want more spacious homes. That pent-up demand has been further encouraged by the Stamp Duty holiday that has been in place from July 2020 and tapering off next month. The result has seen the highest level of demand in seven years, according to the report.

The supply of available homes to buy, on the other hand, has been notably lacking. That, in turn, has prompted an annual rate of growth in average house prices of 13.4% as at the end of June (although that figure has fallen to 10.5% in July).

Although current trends are likely to reach a peak anytime soon, the autumn is expected to see a return to some semblance of normality, says Property Wire, as the IMF’s economic forecast for the UK economy is translated into reality, the end of the Stamp Duty holiday takes its effect, and supply of low-interest rate mortgages gains further ground.

Ban on new gas boilers is put back by five years to 2040

Alarmed by the high cost of converting to alternative forms of cleaner energy, the Prime Minister announced a five-year delay to the planned ban on the sale of new gas-fired central heating boilers, revealed a story in the Mail Online on the 27th of July.

In a move designed to encourage households to switch to alternatives such as heat-pumps and hydrogen-fuelled boilers, the original plan had been to impose a ban on the sale of new gas-fired boilers with effect from 2035. That deadline has now been pushed back to 2040.

Even so, if the government is to meet its “green revolution” targets of “net-zero” emissions, this means that many working gas boilers will have to have been replaced by the year 2050.

With heat-pumps and hydrogen boilers currently priced at some £11,000 to £14,000 apiece, the total cost of converting to greener heating in the home is estimated to be around £400 billion.

Demand for houses doubles as buyers search for more space

In a report on the 4th of August, online listings website Zoopla underscored the current frenetic activity in the housing market by revealing that demand has doubled from the levels experienced pre-pandemic.

Released from what had been a long series of successive lockdowns, house hunters began looking for homes that offered greater space – with room for a home office inside or a larger garden outside. That demand was further fuelled by the Stamp Duty holiday.

Demand reached levels 114% above those recorded at this time of the year during the period 2017 to 2019.

Coupled with a notable shortage in the supply of homes to meet that increased demand, average house prices leapt by 7.3% in the past year – although the average price of a flat lagged behind somewhat with an increase of just 1.4%.

According to figures published by Statista on the 11th of June 2021, the total value of commercial property in the UK at the end of 2020 was estimated to be more than £1.08 trillion, making this sector of the property market the second largest in the whole of Europe.

It remains a buoyant market, with more than a further £10.5 billion invested in the UK’s commercial property market in the first three months of 2021 alone, according to statistics produced by estate agents Savills on the 26th of April.

Even these figures probably do little justice to the sheer range and diversity of what is defined as commercial property – everything from shops and retail outlets to surgeries, restaurants and cafes to wine bars, pubs, and takeaways, factories and workshops, offices, industrial units, and warehouses, blocks of flats and other residential units, to name but a few.

Commercial property insurance

Whatever the use or purpose, the commercial property in question is almost certain to be critical to the viability and success of the business it houses. The building itself, along with its contents (if required), is sufficiently valuable to require the protection of commercial property insurance.

The types of commercial property insurance are as varied as the premises themselves and may even cover mixed-use structures where part of the building is in commercial use and the remainder is residential.

Other commercial property insurance policies may be written to cover a whole portfolio of different properties – bringing the protection each of them needs under one umbrella with the convenience of a single annual renewal date and the discounts typically available when insuring multiple properties with the same insurer.

Unoccupied commercial property insurance policies are also typically available for when the premises are vacated or closed down for longer than, say, 30 consecutive days or so (the precise interval varying from one insurer to another).

What does property landlord insurance cover?

Because commercial property insurance policies are written for such a very wide range of different premises – each of which might be put to different uses – the policies are also wide-ranging in the nature and extent of the cover provided.

Typically, however, you might expect to see cover for some or all of the following risks:

Building insurance

  • at the heart of practically any type of property insurance is the protection of the structure and fabric of the building itself against a wide range of potentially serious risks such as fire, explosions, flooding, storm damage, impacts (from vehicles or falling objects), vandalism and theft;
  • building insurance is critical whether you own the premises or occupy them as a leaseholder – in the latter case, of course, you might want the reassurance of uninterrupted business operations by ensuring that your landlord has arranged suitable building insurance;

Contents insurance

  • many commercial properties are likely to house valuable contents, much of which is likely to be critical to business operations – whether those contents are plant, machinery, and equipment, stock and supplies, or work in progress;

Liability insurance

  • if you are the owner of the commercial premises, you owe a duty of care to any visitors, customers, neighbours, or members of the public;
  • if you have let the premises to a tenant or leaseholder, you owe the same duty of care to your tenants and the visitors to the business premises they have leased or rented from you;
  • commercial property owner’s liability indemnity insurance, therefore, is likely to assume a critical role in the insurance cover you arrange – and, given the potential value of liability claims against you – typically provides several million pounds of indemnity.

Summary

This brief review of the nature and extent of the typical commercial property insurance policy may help to illustrate the important role it may play in protecting the premises from which you are conducting your business – since the protection of the premises is likely to be critical to the continuity of your business operations.

For further reading on the subject, you might want to review our Complete guide to being a commercial property landlord.

Finally, if you have any questions, please do not hesitate to contact us here at Cover4LetProperty on 01702 606 301 – we will be delighted to help.

HMO insurance has been specifically developed for landlords who own and let a House in Multiple Occupation (HMOs).

HMOs are a form of shared housing. Officially, an HMO is defined as a property that is occupied by at least three people who comprise more than a single household and share certain basic facilities in the dwelling, such as a bathroom and kitchen.

If the property is occupied by five or more people, comprising more than one household, and at least some of them share facilities like a bathroom or kitchen, it is classified as a large HMO – and the landlord must hold a licence from the local authority to run it as such.

In some areas of some local authorities, the landlord of any HMO – standard or large – requires a local authority licence to let the property.

To hold such a licence, you must agree to any conditions imposed by the local council relating to how the property is let and the standards of accommodation that must be maintained to prevent overcrowding and the health and safety of all tenants living in the premises. You must also demonstrate that you are a “fit and proper person” to be the landlord – that you do not have previous convictions for housing offences, for example.

What does HMO insurance cover?

Specialist HMO insurance recognises these unique characteristics of an HMO and the distinct risks associated with a larger let property in multiple occupation in which some of the most essential facilities – such as bathrooms and kitchens – are shared.

Reflecting those concerns, HMO insurance typically takes into account the number of tenants who may be sharing the let property – since the insured risks are likely to increase as there are more tenants under the same roof.

You might also take comfort from the fact that HMO insurance arranged by ourselves here at Cover4LetProperty also includes cover against malicious damage as standard (limits apply) – a risk to which a let property in multiple occupation may be more than usually vulnerable.

With differences such as these aside, however, HMO insurance extends cover across similar headings to other types of let property or landlord insurance, namely:

  • building insurance – to protect the structure and fabric of the building itself;
  • contents insurance – to safeguard those contents owned by the landlord;
  • landlord liability indemnity insurance – for indemnity against claims raised by those who may have been injured or suffered property damage in your HMO; and
  • compensation for loss of rental income – following any serious insured event which may leave the HMO temporarily unlettable pending repairs and reinstatement.

Why can’t I use standard landlord insurance to cover an HMO?

Aa we have seen, an HMO is a distinctive and particular type of let property offering shared accommodation to its tenants.

The risks and perils for the landlord of any such property, therefore, are also distinctive, particular, and different to those likely to be encountered in a single tenancy rental property.

It is precisely those differences that are not only recognised by specialist HMO insurance but also distinguish it from standard landlord insurance policies. Indeed, the specialist nature of HMO insurance is such that if you rely solely on regular, standard landlord insurance to safeguard your HMO you may find out – too late – that any claim is rejected because you failed to arrange the appropriate specialist cover.

Summary

If you are the landlord of an HMO, therefore, you must first comply with the special conditions and terms of any licence required by your local authority.

Because it offers a distinctive form of shared accommodation, HMO insurance is also a specialist product formulated specifically for landlords of Houses in Multiple Occupation (HMOs).

For further reading, you might want to review out detailed information on the subject – A Landlord’s Guide to HMOs.

Buying to let is a straightforward business proposition – your let property is a single business asset from which you intend to generate a steady stream of rental income.

In that simplicity lies one of the major risks your business is likely to encounter –reliability in receiving the rent you are due. This is where rent guarantee insurance may give you some peace of mind.

What is rent guarantee insurance and what does it cover?

Rent guarantee insurance is one of those insurance products that does exactly what it says on the tin. If your tenant accumulates arrears of rent that are not going to be repaid – or simply does a midnight flit and disappears – the insurance typically compensates you for your loss of rental income.

Naturally, the level of cover typically depends on the premiums you pay. In most circumstances, your insurance contract sets a maximum amount of rent payable, over a specified period of time, or until you have gained vacant possession of your let property.

Why do I need rent guarantee insurance?

On the 5th of January 2021, Citizens Advice reported that one in every four private sector tenants is currently in rent arrears – that is a total of some half a million tenants. The average amount of rent owed was £700 but the grand total of all arrears stood at an estimated £360 million.

In short, rental arrears remain a problem and are a bane in the life of any landlord. The coronavirus pandemic has only made matters worse, of course, but landlords and their representative organisations lent their support to a temporary halt to immediate court proceedings for the eviction of tenants who were less than six months in arrears.

Legal remedies

Although reasonable landlords continue to exercise their judgment before leaping to the legal remedy of evicting tenants on the grounds of rent arrears or from pursuing absconding tenants through the courts, the potential recourse to the law might raise the question of whether rent guarantee insurance is at all necessary.

Securing any such court order is neither quick nor easy – not to mention the cost of your legal expenses.

For the heard-pressed landlord, therefore, rent guarantee insurance offers far more immediate financial relief – and the recovery of the rents owed can be pursued through the courts in the fulness of time. The latter is still likely to be a time-consuming and expensive business, with rapidly escalating legal bills.

For that reason, it is typically a condition of any rent guarantee insurance policy that the insured also has landlord legal expenses protection insurance – with the two frequently combined into a single policy – to cover the legal costs of evicting a tenant and pursuing the recovery of rent arrears through the courts

Exclusions – what rent guarantee insurance generally does not cover

As with any type of insurance, the exclusions from perils covered are as important to identify and understand as the risks covered by your policy.

Naturally, those exclusions may differ from one policy to another, but may typically apply in those situations where:

  • your tenants are withholding payment of the rent due because they are in some dispute with you as their landlord;
  • the tenants have accumulated arrears of rent because they have suffered an injury or been involved in an accident, they are sick or pregnant, or they are unemployed or been made redundant – and cannot, therefore, afford to pay the rent;
  • if the tenants have absconded and remain untraceable, owing arrears of rent; or
  • where you have been unable to recover arrears of rent from any deposit currently in the safekeeping of a third party – since registered deposit holders might sometimes refuse to allow any such financial recovery from the monies they are holding.

Summary

Rental arrears or the non-payment of rent by tenants are risks faced by the landlord or any buy to let business.

Financial indemnity against those risks is provided by rent guarantee insurance, which compensates you for the amount of lost rent or rental arrears – up to limits set out in your insurance policy.

Rent guarantee insurance is invariably tied in with legal expenses protection insurance, granting the policyholder the wherewithal to pursue the recovery of lost rental income that is due through the courts.