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Advice for Landlords: Rogue Tenants, Portfolio Insurance & Tips for the Live-In Landlord

1. Live-in Landlords - Our Advice

What is a live-in landlord? The clue is in the title, of course. A live-in landlord continues to live in the property in which a lodger rents a room (sharing facilities but without any exclusive right to any part of the dwelling). The more conventionally titled landlord typically lets an entire, self-contained dwelling to tenants, who enjoy exclusive rights to occupy the property for the duration of their tenancy agreement. 

This difference establishes the essential distinction between a tenant and a lodger. SpareRoom published a guide for landlords who choose to offer lodging in this way.

Homeowners may choose to rent out a spare room in this way. The option may also be open to private sector tenants and those in social housing – provided, of course, that they have the landlord’s permission and that their tenancy agreement allows such an arrangement.

Rent a room insurance

What you also need to know if you have someone lodging in your home is the insurance necessary to protect you against the risk of various financial losses and damage. 

This specialist, live-in landlord insurance differs from regular home insurance bought by owner-occupiers or even the landlord insurance used by those who own buy to let property.

Of particular concern for live-in landlords, for example, maybe the heightened risk of loss or accidental damage to the home’s contents when a lodger is living there – not to mention the opportunities for theft that might tempt the unscrupulous lodger. 

Lodging arrangements 

The typical arrangement is for a lodger to be offered a room in which to sleep but to share most other facilities with the permanent residents of the home. The legal term for this type of lodging is “excluded occupier” and grants very limited rights to the lodger who may be asked to leave after you have given them “reasonable notice to quit”.

If you have provided your lodger with accommodation that requires no sharing of facilities with you, however, they may enjoy “exclusive occupation” of the space they occupy. In the case of such “non-excluded” tenancies, notice to quit must be given in writing, typically four weeks in advance (depending on the specific terms of their tenancy agreement).

House in Multiple Occupation (HMO)

It is also important to know that if you take in three or more lodgers as tenants, and they are not members of the same family, but share facilities such as a toilet, bathroom and kitchen in your home, the house is officially recognised as a House in Multiple Occupation (HMO).

As the landlord of an HMO, you have considerably more onerous responsibilities, may need to be licensed by your local council and may also need those special circumstances to be reflected in any live-in landlord insurance you arrange.

Here at UKinsuranceNET, we are specialists in the provision of all types of property insurance, including lodger insurance, so you might want to consult us about any doubts or queries you have about keeping your home safe when you have a lodger or lodgers under your roof.

2. Rogue Tenants - What to do to protect yourself

According to a leading insurer, AXA, property landlords are still leaving themselves exposed to rogue tenants as they are failing to carry out even basic checks before letting a property. Their warning to landlords is: Do more to protect yourselves from these rogue tenants.

AXA’s research showed that nearly 60% of tenants admitted they had broken the terms of their tenancy agreement, and over 30% admitted they had broken the law regarding the same tenancy.

The research highlighted;

  • 25% pay their rent late
  • 10% disappeared owing the landlord money
  • 8% have sublet to someone else
  • 15% have received complaints regarding noise levels
  • 20% kept pets without permission

On the crime front, nearly 10% of tenants admitted to actually committing a crime in the landlord’s property.

The research highlights that landlords do have a legal responsibility to ensure that the premises they own are not used for any criminal purposes.

In addition to which under the Misuse of Drugs Act, then the landlord could face prosecution if one of his tenants was found to be producing banned substances or cannabis in their rented property.

AXA also warns that while the responsibilities are getting much stricter, unfortunately, many landlords are still failing to carry out basic checks on their potential tenants.

The research also highlighted that nearly 40% of landlords do not carry out sufficient checks on their prospective tenants, and neither do they carry out any criminal record checks.

Landlords were also accused of being uninterested when it came to actually visiting the property, either between lettings, or whilst let with over 30% of landlords admitting to never visiting their property during a rental.

Only 35% of landlords carry out a credit check, less than a third ask for employment references, and fewer than 30% bother to ask for references from the tenant’s previous landlord.

Whilst the research highlighted several deteriorating areas, this was not the case when it came to tenancy agreements which the research highlighted as one of the key documents offering landlords a degree of protection.

AXA research highlighted that landlords are grasping the issues here and getting much better, with over 75% of tenancies now based on a formal tenancy agreement, as compared to last year when just over 50% of landlords had a formal tenancy agreement in place.

3. The Importance of Portfolio Insurance

The more properties you add to your portfolio, the more onerous and complicated becomes the administration of your buy to let business.

One area in which this is likely to be all too apparent is in managing the insurance cover needed for both your properties and the financial security of your business.

When you started out, you almost certainly recognised the importance of insuring the first buy-to-let property you bought. As you added properties to that buy to let portfolio, you probably made sure that each one was also sufficiently covered by landlord insurance.

The time for multiple property insurance

If you have such a portfolio – and certainly if you are thinking of growing it still further – the time has probably come for multiple property insurance.

By combining the insurance needs for all of your buy-to-let properties, landlord portfolio insurance has the advantages of:

  • A single renewal date, in place of the multiple dates which need to be remembered and accounted for when each of the properties is insured separately 
  • Being able to cover a wide range of different property types (e.g. HMO’s, mixed-use properties and commercial and residential properties) all under one property portfolio insurance policy
  • Cost savings through the purchase of insurance for more than one property at a time 

Managing the operating costs of your buy-to-let business is even more important as your portfolio grows. Any application you make for a further mortgage to grow your portfolio needs to be accompanied by a thorough assessment of the entire business case for your operations – following rules introduced by the Prudential Regulation Authority (PRU).

That means an examination of the overall profitability of your buy-to-let business – taking into account the whole of your portfolio and not just individual properties. One of the principal factors affecting that profitability, of course, is your management of operating costs – for which essential landlord insurance is a major component.

By managing your landlord portfolio insurance – by eliminating some of the time and costs in maintaining insurance across all of your properties under a single policy – therefore, you are in a much stronger position to continue to grow your portfolio.

Essential cover

Although your needs and requirements as a landlord are united under a single multiple property insurance policies, this continues to provide all of the safeguards you otherwise enjoy when each property is insured individually. 

In other words, you continue to enjoy:

  • Full protection for the buildings in which you have invested (against the many and varied risks of loss and damage each one faces)
  • If required, cover for the contents you own
  • Indemnity against your liabilities as a landlord – in the event of a tenant, one of their visitors, a neighbour or a member of the public being injured
  • Compensation for loss of rental income following a major insured event which leaves one or all of your properties temporarily uninhabitable.

As the size of your buy to let portfolio increases, you are more likely to employ others to help run your buy to let business. The moment you take on any such employee, the law requires that you hold a minimum of £5 million employers’ liability insurance – to enable claims from any employee, past or present, who is injured or contracts a longer-term medical condition whilst carrying out their duties for you.

That employers’ liability insurance may also be incorporated into your landlord portfolio insurance.