One of the first lessons learned by any buy to let landlord is likely to be the importance of landlord’s insurance. In many cases, that it is an extremely simple and straight forward affair of matching the insurance cover required to the property in question and the tenants it is likely to house.
If you are the landlord of a block of flats, with different tenants holding different tenancies and over varying periods of time, the question of insurance might seem relatively more complicated.
In fact, provided you arrange specialist block of flats insurance, the issue may prove as simple and straight forward as ever.
Freehold or leasehold ownership?
If you own the freehold of the block, there is little question that you bear overall responsibility for the safety and protection of the whole block – and that includes the all-important issue of building insurance, which safeguards the structure and fabric of the whole block against such potentially serious risks as fire or explosions, storm damage or flooding.
Although your ownership of the whole block may pave the way for healthy financial returns, you have multiple dwelling units and tenants to take care of, each with their own kitchen, bathroom, and many other potential sources for something going wrong.
You might own a portfolio of individually scattered buy to let properties. The difference with a single block of flats, however, is that each unit sits cheek by jowl with its neighbour – and a problem encountered by just one of your tenants can spread in a trice to tenancies alongside or on adjacent floors.
If you own the lease of the block, you are likely to pay both a ground rent and a maintenance charge to the freeholder. But you might usually count yourself lucky to be free of the responsibility for arranging building insurance for the exterior of the block and its common areas.
But you had better not dismiss the importance of block of flats insurance quite so quickly.
Although the freeholder – effectively, your landlord – typically arranges the building insurance, this may not be the case in your particular instance. Besides, you will need to know exactly what any building insurance covers – or fails to cover.
Even when you have satisfied yourself that adequate building insurance is in place for the block, there are other elements of insurance that are likely to prove indispensable:
Landlord liability indemnity insurance
- whether you own the freehold or the leasehold of the block, as a landlord you bear a responsibility for taking every reasonable precaution to safeguard your tenants against injury or property damage;
- if a tenant, one of their visitors, a neighbour, or even a passing member of the public is injured or has their property damaged through some contact with your block of flats, you may be held liable and sued for compensation;
- landlord liability claims such as this may involve substantial sums – especially if physical injuries are concerned – and that is why block of flats insurance arranged by us here at UKinsuranceNET includes a minimum of £5 million of cover as standard;
Compensation for loss of rental income
- whatever type of ownership you have, you may also need to make sure that your rental income is secure if an insured event leaves part or whole of the block temporarily uninhabitable and unlettable pending repairs and reinstatement;
- typically, this is achieved through provisions in your block of flats insurance for compensation for such loss of rental income;
- although individual flats may be occupied by your tenants, you may still own furniture and furnishings in the flats or in common areas;
- your block of flats insurance may provide cover for any such contents you own.
Right to Manage insurance
Of course, you might not own either the freehold or the leasehold of the entire block of flats, but simply the leasehold of a single flat. Block of flats insurance may still be a subject of particular interest to you.
That is because, together with a majority of the other leaseholders of flats in the block, you might have decided to exercise your Right to Manage.
As explained by the Association of Residential Managing Agents (ARMA), since the Commonhold and Leasehold Reform Act of 2002 leaseholders have had the legal right to take over the management of their block – including responsibility for its maintenance and the arranging of building insurance – from the freeholder or landlord.
Although this is typically a route to securing better value for money on the building insurance that is in place for the benefit of all the leaseholders, it is important that the Right to Manage Company that is set up arranges purpose-designed Right to Manage insurance to safeguard the integrity of the entire block of flats.
If you own a block of flats, ensuring you get the most comprehensive and cost-effective property insurance is key. Please contact us today on 01325 346 328 for a no-obligation chat about your landlord insurance needs or for a quote.