Cautionary tale to include fire cover clause in AST!

Cautionary tale to include fire cover clause in AST!

9:23 AM, 20th September 2021, About 4 weeks ago 51

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We own a small bungalow that we rent out via an agent. We picked a local agent as the property is too far away from our home and neither of us has the specialist knowledge to self manage.

Over the Bank Holiday, we received a call from the agent to say overnight the property had been on fire and was uninhabitable. My husband spent 4 hours fighting through Bank Holiday traffic to find the fire officer racking through the burnt out garage, the tenants in tears and the agent holding the keys and latest electricity certificate.

The agent then told the tenants that our insurance policy covered temporary accommodation, storage of their goods and transport of their goods to their new accommodation. (The garage was destroyed plus one bedroom, the kichen/bathroom /lounge/master bedroom have scorched ceilings but the furniture etc is fine).

I contacted my insurance company who arranged temporary accommodation and a loss adjuster was instructed. The loss adjuster arrived two days later and we gave her a copy of our AST. She read it and informed us that the tenants were not covered in any way shape or form by our insurance as there are no clauses in the AST stating that such cover was to be provided by the landlord – despite those clauses being in our insurance policy.

Our tenants have now had to go into emergency local authority accommodation and they have abandoned their furniture in the bungalow.

Had the clauses been in the AST the tenants would have had 2 years rental cover in another property, they would have had to carry on paying the rent for my property and the agent would still be getting her management fee.

So the moral of the story is to have a good read of your agent’s AST and find an agent who is aware of the legal liabilities that the AST covers.

Carole



Comments

by Binks

15:31 PM, 20th September 2021, About 4 weeks ago

Reply to the comment left by Ian Narbeth at 20/09/2021 - 14:41
Agree with you Ian, a regular AST doesn’t make it a landlord’s contractual responsibility to cover alternative accommodation and costs of moving, so insurance will not consider it a cost incurred by the insured landlord and hence it’s not covered.

Tenants are responsible for contents insurance and there are tenant covers available that provide alternative accommodation if their rented home becomes uninhabitable due to damage.

by Binks

15:39 PM, 20th September 2021, About 4 weeks ago

Reply to the comment left by Carole Wicklow at 20/09/2021 - 09:43
I suspect what the adjustor is actually saying is the insurance company is only responsible for costs incurred by you, the insured party. They are not responsible for your tenant’s costs, unless you can show that you have somehow contracted to be responsible for those costs (which is where the AST comes into it).

by John

16:02 PM, 20th September 2021, About 4 weeks ago

You should not always take the loss adjuster at face value if they are appointed by the insurance company. You can employ your own loss adjusters. I have had 2 previous claims where the same loss adjuster gave me incorrect information.
Don't forget that the loss adjuster is there to protect the insurance company's interests not yours.

by Ian Narbeth

17:06 PM, 20th September 2021, About 4 weeks ago

Reply to the comment left by John at 20/09/2021 - 16:02
John, With respect, you are missing the point. Carole is on a hiding to nothing with this one. Suppose she employs a loss adjuster who charges her a fee. If the LA fails to convince the insurer, she is out of pocket. If the LA does convince them, the money goes to the tenant (less the fee) and the insurance claim made by Carole is increased. She might well find her premiums increased next year.

Sometimes a loss has to lie where it falls. As mentioned above it is tough but it was open to the tenants to effect their own policy.

by Carole Wicklow

18:18 PM, 20th September 2021, About 4 weeks ago

Reply to the comment left by Ian Narbeth at 20/09/2021 - 14:41
Thank you, you are correct and have explained it far more succinctly than I could. No, we were in no way at fault, have electric certs etc and maintenance up to date.

by John

8:56 AM, 21st September 2021, About 4 weeks ago

In reply to Ian Narbeth on 20/09/21 -17.06
In my case the policy covered temporary accommodation for the tenant, removal and storage of furniture and repairs to the property after a flood. In the meantime the tenant continued to pay me the rent. I assumed this was normal in a buildings insurance policy.
As for the loss adjuster he initially told me that the tenant would stop paying the rent and would have to find their own temporary accommodation. The insurance company would then reimburse me for loss of rent, a cheaper option for them. This was incorrect.
Obviously this policy would not cover tenants contents which should be insured by them.

by Ian Narbeth

9:54 AM, 21st September 2021, About 4 weeks ago

Reply to the comment left by John at 21/09/2021 - 08:56John, I think you will find that most ASTs provide for a rent cesser following damage that renders the property uninhabitable. The classic legal position is that rent continues to be payable."The rent rises from the ruins" in the words of one 19th Century judge! This is on the basis that the land (or even airspace) remains available to the tenant and he must continue to pay rent. Sounds a bit feudal to me!

The modern position is that the landlord insures for loss of rent. In commercial tenancies the tenant usually pays the cost of this insurance. In residential, the landlord factors the cost in.
I am somewhat surprised that your policy responded to the loss in the way you describe.

by Carole Wicklow

10:57 AM, 21st September 2021, About 4 weeks ago

Reply to the comment left by Ian Narbeth at 20/09/2021 - 14:41
Thank you Ian for your replies. I am currently taking on another agent for a different property/area and have asked her to put the clause in about temporary cover for the tenants etc, after all I am paying for it in the insurance cover. Why would you not recommend landlords take on extra liability?

by Ian Narbeth

11:07 AM, 21st September 2021, About 4 weeks ago

Reply to the comment left by Carole Wicklow at 21/09/2021 - 10:57Why would I not recommend landlords take on extra liability?
For the simple reason that this increases risk and therefore cost. Why should I accept responsibility for my tenant's belongings when the tenant can insure them?
It also means that the AST has to set out the circumstances in which I would be responsible and any limitations on liability.
In hard-nosed business terms (and I have had over 200 tenants in the past 8 years) insurance is not an issue that is raised very often by tenants. I will not gain by taking on more risk. I remind them that they need to take out their own insurance. After that it is up to them.

by Carole Wicklow

11:41 AM, 21st September 2021, About 4 weeks ago

Reply to the comment left by Ian Narbeth at 21/09/2021 - 11:07
Thank you. We have warned all our tenants but the take up of insurance is to say the least indifferent. I did ask my insurance compny to take out the clause but they just say it is their standard policy etc ...


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