The downturn in the residential property market is driving thousands of homeowners into becoming amateur landlords for the first time.
Stephen Ludlow, director of ludlowthompson.com, explains: “Virtually overnight people who never anticipated becoming landlords are letting their properties because they are unwilling to accept lower prices and circumstances mean they are unable to live in the property themselves.”
“For example, they may have inherited property, work commitments mean they need to relocate or they need to accommodate a growing family.”
“Unlike buy-to-let investors, new landlords may not have had time to research the market beforehand and may not be clear as to their legal obligations as landlords.”
One of the most important areas for new landlords to consider is the insurance for their rented property.
Defaqto principal, Brian Brown, the co-author of Defaqto’s 2008 report on the UK Home Insurance market says: “Some providers will extend your normal home insurance to take into account the changes to the risk. But the risks that a landlord faces are very different to those under a normal home insurance policy.
“If your insurer allows you to extend your existing buildings and contents policy, you may be required to accept various warranties and exclusions, such as periods when the property is unoccupied which might make the policy unsuitable, in which case, a dedicated ‘residential let’ policy may be needed.”
Typically these policies only cover the building risks as tenants are responsible for their own possessions, although contents cover can be obtained if you are letting furnished accommodation.
MMA includes cover up to £5,000 for fitted carpets, blinds and domestic white goods, while Norwich Union providers £10,000 of cover for carpets, furniture and furnishings in communal areas under the buildings sections of their policies.
Insurance should also include ‘alternative accommodation cover’ in case the building becomes uninhabitable and you need to pay for alternative accommodation for the tenants and storage for furniture.
Theft or malicious damage to the property by tenants is another risk which won’t always be included in a building insurance standard policy, but watch out for excesses which can be as high as £2,500.
Posted by Pamela Atherton
I first advised friends to let-to-rent during the early 90’s.
When prices are falling I consider it to be most sensible.
The money saved from not selling/buying should easily cover all costs in most situations.
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