A story to send a shiver of fear down any landlord’s spine caught my eye in the national press recently. A couple let out their treasured home of 30 years to tenants – a husband and wife – when they moved abroad to do voluntary work for a charity for few years. The tenancy ran smoothly for a couple of years and then one of the couple lost their job and they subsequently stopped paying rent, despite receiving housing benefit.
The landlords returned home to try and sort the problem out, only to find the property in a state of disrepair and the tenants refusing them entry. They were left with no choice but to start proceedings to have the tenants forcibly evicted – a process which took five months at a cost of £2,500 to the landlords as they had not taken out any form of rent guarantee insurance or legal expenses cover.
Their property was ruined. It had been stripped of furniture and other fittings. There was extensive water damage caused by excessive heat and humidity – a sign that the tenants had probably been growing cannabis. The police pointed the landlords to their household insurer and the couple made a claim for the £56,000 it cost them to restore their home to its former glory.
And this is where the nightmare reached its crescendo as the insurer refused to pay out, citing small print that excluded any loss or damage caused by persons lawfully in the home or malicious damage by tenants. The landlords complained to the financial ombudsman, saying they had been mis-sold their policy as they had made it clear that it would be rented and found it extraordinary that they should be found negligent because they did not read the small print of the policy documents mailed to them after they had left the UK.
The ombudsman upheld the insurer’s decision stating that the policy wording made it clear that that it did not cover malicious damage by tenants.
Even if the policy had offered this cover, the fact that the landlords had not regularly checked on the property throughout the tenancy meant that the insurer would still have been within their rights to refuse the claim.
You have to feel for the couple concerned however this horror story is a vivid example of how financially and emotionally devastating it can be if a landlord fails to take out specialist landlord cover for their property.
Anyone who is letting a property that does not insure against loss of rent or malicious damage is gambling with their income, their investment or their pension. It’s as bad as not taking out any insurance at all.
If you have any landlord clients, it might be worth sharing this story with them and offering to check their cover if you didn’t arrange it for them. Given the leap in tenant demand that is being reported, you could see more would-be landlords coming into the office. Pouring over the small print for a few minutes could end up saving them thousands and marking you out as their go-to source for specialist insurance that is designed to do what it says on the tin.
Kevin Paterson is managing director of Source Insurance