There has been a lot of news and discussions about short term lets recently. The housing charity, Shelter, recently conducted some research on short term living. Their research found that 12% of parents who rent privately feel as though short term lets may leave their children feeling unsettled.
Short term let is the name given to a tenancy agreement of less than six months. Any tenancy agreement less than six months is not governed by the Landlord & Tenant Act 1985 so there is no form of protection for a landlord and/or a tenant. Short term lets are rare as they are only suitable for very specific situations.
Who uses short term lets?
Short term lets are rare as they are only suitable for very specific situations. Someone might be living away from home for a few months due to work commitments. Or they may be waiting for a new house to be built for them to move in to.
Recently there has been a rise in demand for letting on a short term basis. This is mainly through the increased popularity of holiday let websites such as Airbnb. It often works out that it is cheaper to rent a property through an Airbnb than it is to have a hotel, hence their growing popularity. However, often landlords don’t appreciate that their current insurance policy won’t cover this type of let.
What are the benefits for landlords?
There are a lot of benefits to tenants but what are the benefits to landlords? Well they give landlords another option when thinking about selling or reletting. The landlord can let the property on a short term basis while they make their mind up. Then also short term let while the property is on the market and the sale is progressing. Having an empty property is usually not an attractive prospect to landlords so a short term tenancy provides an income in the interim.
What are the issues with Short Term Letting?
There is no legal backing for landlords with short term lets. Also if the tenants then refuse to leave the property getting them out can be tricky as there is no legal process or contract. It may be that a longer term let is more preferable for the landlord. People often don’t appreciate that short term lets are completely different from a typical long term tenancy. This is because the Landlord and Tenant Act 1985 governs all tenancy’s over six months long.
You also have to ensure that you have the right insurance in place. A typical landlord insurance policy is unlikely to cover the potential risks that short term lets create. These can include malicious damage by tenants and other risks. Whilst you might potentially get a higher income it is very important to understand your responsibilities.
Two big issues for landlords with short term lets are void periods and wear and tear. Short term lets may bring flexibility but they also bring uncertainty as to when the property will be relet. It is the nature of the beast.
There will also be additional costs for wear and tear due to the endless stream of tenants coming and going. With tenants staying for short periods they are unlikely to take as good care of the property as long standing tenants.
Lastly, the landlord will need to cover the costs in a short term let that would otherwise be paid by the tenant in a long term let. These include utility bills, internet, TV license, and council tax. The property would need to be fully furnished and well equipped. These all need to be considered when looking at short term lets.
Renting out a property is one of the best ways to make a profitable passive income. You can gain from the rental income and make a healthy return on your investments. Rental income can be a source that can see you through to your retirement. But it is not just a case of sticking your property on the books of a letting agency. You may have invested in a Buy to let, or plan to rent a property of your own. But there are some important landlord responsibilities that you may not be aware of. It is, for instance, important that you have the correct tenancy agreement. That you have carbon monoxide alarms and that you are aware of all Government approved schemes. That you have an assured shorthold tenancy. That your property is energy efficient and you understand what a Section 21 Notice is (now due to be abolished).
Health and Safety regulations
As a residential and commercial landlord, you will need to ensure that your property is safe to rent. You will need to make sure of whether there are any signs of damp and mould which often means that there is condensation. As a landlord, it is your responsibility to maintain the structure and the exterior of the premises including the drains, gutters and external pipes. If the property is a house the whole structure including the land it sits on is the landlords’ responsibility such as steps in the street, structures on the exterior, garden paths and steps. It is important to inspect water and gas pipes and electrical wiring together with basins, baths, and toilets. As well as all fixed heaters and water heaters.
Mould is the most common complaint from students as they believe that mould is growing on their property and they think it is “damp”. Water ingress causes damp, either from roofs, leaks, blocked gutters, rising damp and cracks in internal walls.
Condensation can also cause mould. It is caused by poor ventilation in the property and moisture on the building and walls and around windows. Condensation looks like black spots on the walls and is an easy problem to solve by simply opening the window on a regular basis. You may find that this is not necessarily a landlord responsibility but for a tenant to ensure that it is wiped down.
Gas Safety Certificate
All gas appliances within the property require a gas safety certificate. It must be carried out by a gas safety engineer. This is to ensure that the installation is correct. It also ensures that the boiler has no carbon monoxide emanating from it which means that it could kill. You must provide a copy of this certificate to the tenants and have it acknowledged within 30 days of the gas safety taking place. This is now law.
EICR reports i.e. electrical installation condition reports
These start to become compulsory from the end of the year and landlords should ensure that they do. The check is to ensure that all electrics i.e. lights, sockets, and wiring follow the electrical equipment safety regulations. They need to done by a qualified electrician every five years.
It is the law to now install smoke alarms on every floor of the property. A Co2 detector is also required in any room that has a solid fuel burner. This does not mean a boiler i.e. a gas combination boiler but it is always safe to do so. If the property has an HMO license i.e. a house in multiple occupation. It may require fire alarms and fire extinguishers. Each individual local council will let you know what their regulations are.
If you are renting out a furnished property. Then you must ensure that all soft furnishings adhere to the furniture and furnishing regulations. This includes such items as beds, sofas and mattresses and even cushions. Each item must have a carelessness causes fire label attached to ensure that they are compliant. This is critical to ensure that you are legally compliant.
Energy Performance Certificate
All rented properties now have to have an energy performance certificate which lasts for a period of ten years. This outlines the energy efficiency rating and whether the property requires any improvements if any. It contains information on energy costs and energy efficiency. Together with recommendations on resuming energy consumption. They are carried out every ten years. At present there is a rule for landlords to have a minimum rating of E. This will change over the next few years and you need to ensure that you are compliant.
Tenancy Deposit Protection
All Deposits paid by tenants are now put into a tenancy deposit scheme. There are various schemes that are all backed by the Government. Legal documentation has to be served on the tenant to ensure that they are aware of their requirements. It is critical that landlords understand what needs to be served on tenants. If for instance, you wish to evict a tenant in future the paperwork has to be correct. In the case of Cardon Property limited –v- Monty Shooltz. The court held that a Section 21 Notice could not be served on the tenant unless all the other documentation was carried out first. In this case, a gas safety had not given to the tenant at the start of the tenancy before the tenant took up occupation. The court held that the tenant did not have to follow the Section 21 Notice as the landlord had not served the gas safety at the time.
It is so critical if you are unsure of what you should be serving on a tenant when they take the property. Or when they go on to a month to month contract i.e. at the end of their term. That you check with your solicitor or your letting agents.
You will need to insure the whole building. This will include the bricks and mortar, roof and foundations. There may be a certain amount of contents which will need to be accounted for, such as carpets and blinds or curtains. Tenants will need to insure their own contents separately. There will be insurance for third party liability i.e. where something falls off the building and hurts or injures somebody. It is important that you are aware that as a landlord you are responsible for insuring the building on a comprehensive basis.
Landlord insurance will cover fire, flood, accidental damage and malicious damage. If you lived there before then your current home insurance wouldn’t cover you. It is important that you are aware of the actual insurance that you need. If you are buying a property on a buy to let basis then you will need the correct landlord insurance. To make sure that you’re covered and to provide this to your mortgage company before you let it out and complete. Why not talk to us to discuss your requirements and to get you the best policy at the best rate.
When you rent out a property, in whatever capacity, you need to have the right insurance in place. For both you and your tenant. It is important that you understand that this is not home insurance as you would perceive it to be and that the level of cover you have is correct. Often you will find that if there is a fire or flooding home insurance would not cover your property if let out. The contents may also not be covered by a standard home policy.
There are different types of landlord insurance cover. Such as commercial landlords insurance, business insurance and insurance for unoccupied properties. There are various areas covered such as employers liability insurance and public liability insurance. It is important that you know that the buildings insurance cover you have is correct.
Renting out a property brings a new set of risks, see our article on Landlords responsibilities. You need to ensure that your investment is secure and protect it as much as possible.
Residential Landlords Insurance and Commercial Landlords Insurance covers risks your home insurance wouldn’t. There are various levels of cover available. You should ensure that there is contents cover, fire and flooding cover. Unoccupied properties cover, employers liability and public liability insurance if required. It is important that you make sure that your investment is secure and protected. Also that you don’t run the risk of having a claim rejected. If you are trying to make a claim on residential insurance that is not correct for rental properties.
There are differences between residential building insurance and commercial landlords insurance contained in other articles.
Landlord insurance covers everything from residential insurance such as buildings insurance and contents. Tailored and extended to cover your tenanted property and take on all the risks as follows:-
Rehousing costs/Loss of Rent/Alternative Accommodation
This type of cover comes into effect where there may be fire or flood at the property rendering it inhabitable. It could be any such insured events even earthquake. It would enable you to make sure that you’re insured for loss of rental income and alternative accommodation. If you have a standard residential policy on your building it would not cover this as they are not for commercial landlords. Landlord insurance can also be extended to cover non-payment of rent by defaulting tenants. But this is separate insurance and you would need to speak to us on this.
Most landlords insurance policies have a period where the property can be vacant when having a changeover of tenancies. This can range from thirty to ninety days dependant on your policy. But thereafter it is your responsibility to make sure that the insurance company’s informed. You would then go onto a limited amount of perils known as FLEA fire lightening earthquake and air crash. It is important that your property is not unoccupied for any length of time because it could affect your policy but you need to speak to your insurance company or ourselves.
Malicious Damage and Theft
Landlord insurance cover often covers wilful damage caused by tenants. This could be for instance where they have left the property and stolen certain items. Such as an oven etc. It could be a boiler or anything else within the property that they may wish to take. It is important that you understand that as this is malicious damage it isn’t covered by every policy. But by most and you should check. Residential/home insurance would be unlikely to cover you for this or any acts of vandalism.
Accidental damage will also be in some policies. It is the cost of repairing or replacing property or contents damaged as a one-off incident. This cover will come under your landlords’ contents insurance. So it is important that you check your level of cover. Not all Insurance Companies have this within their policy. But we can confirm whether this is the case or not. It can be a one-off by some insurance companies and you should check your policy. Accidental damage will not cover wear and tear of an item over a period of time. It is there for one-off events such as a tenant dropping red wine on a carpet. It will not cover the tenants own furniture or belongings within the property. They need to have their own tenants’ contents insurance.
It is important that you familiarise yourself with your policy. To understand what it includes and does not.
It is important that you understand your landlord responsibilities. You have a duty of care to your tenants. Residential insurance will not cover you for public liability. If someone injures themselves as a tradesman or a guest then you are responsible. It is important that you have the correct cover. Landlord buildings insurance covers you for any accidents and injuries to your tenant. It can be the case that there are serious injuries as a result of a landlords negligence. Such as loose tiles, water leaks, burst pipes, broken floorboards or ripped carpeting. Which could result in a hefty claim from your tenant. Your landlord insurance would cover you for the cost of this. An insurance company would pay them directly.
If you did not have the correct cover or the right insurance then you could end up facing a crippling bill. That could affect your cash flow. It is not the compensation that has to be paid but all legal expenses by the tenants or contractors solicitors. The landlords responsibilities have increased again by the recent Human Habitation Bill that has become law. It is important that you understand your responsibilities.
Legal Expenses cover
Did you know as a landlord that your property qualifies as a business? You thus need to have the right insurance for any legal liabilities. Often landlords don’t expect there to be disputes with right of ways or with neighbours. But it can be that this is covered by your landlord building insurance. If a tenant makes a claim against you as outlined above then you would be insured for legal expenses. Not all policies cover the landlords fully. It is important that you understand what is included in your policy.
Legal expenses will not cover you for taking any tenant to court for non-payment of rent. This is a separate rent guarantee scheme that would need to be taken out and we can give you a quote for this.
Landlord Insurance protects landlords from risks associated with their rental property. It usually includes buildings and contents insurance. But it can also include specific cover as we have outlined above such a property owners liability, loss of rent and tenant default insurance. It is important that you have the right cover. Landlord insurance will also cover you for the cost of repairing or rebuilding your property if the structure is damaged or destroyed. It can be extended to various optional extras such as furniture and rental payment insurance.
Do I need landlord insurance?
If you have one or more rental properties, it is important to make sure that you have got the right insurance in place. A standard home insurance policy won’t cover you for risks associated with renting out your property. Whilst landlord insurance isn’t a legal rule it is often needed by mortgage lenders.
There is no legal obligation for a landlord to take out a dedicated insurance policy. But, conventional home insurance won’t cover you for rental activities. If you have a mortgage on your property it is very likely that your lender will need you to take out insurance before you take on tenants. It’s important to note that you will need written permission from your mortgage lender before you let the property. Failure to get this may mean that you may be breaking the terms of your mortgage.
You can choose a range of cover designed for landlords, including property owners liability insurance, contents insurance and buy to let buildings cover. Learn more about the difference between standard homeowner insurance and landlord insurance by reading our various articles. Don’t hesitate to contact us to discuss your requirements.
We are landlords insurance specialists and can offer tailored policies to cover all your requirements. Compare landlord insurance with iInsure365.
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