HMO tenant barricaded room and started £80,000 fire

by Readers Question

8:26 AM, 20th August 2018
About 3 months ago

HMO tenant barricaded room and started £80,000 fire

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HMO tenant barricaded room and started £80,000 fire

A month ago, one of my tenants in an HMO barricaded himself into his room and started a fire. He was rescued by the fire brigade, and although initially pleading mental health issues, has now been charged with arson and is on remand.

I am looking at a repair bill of circa £80,000 I think. I insured through Reich on the advice of this website, but the insurers, LV, are on the cusp of refusing liability, based on small print. I had declared the building to be an HMO, but they needed it to say “bedsit” as well, apparently. They have not said NO yet, but my loss assessor feels it is coming.

I have lost seven other tenancies as a result, and three others are living in tents in the garden. The council has imposed a prohibition order until the fire alarm is repaired/replaced, and this has been delayed at the behest of the insurers to find the cheapest option for reinstatement (before actually accepting liability ).

So my questions are:
1. Have I any other recourse other than just shelling out if LV decide to refuse liability?
2. Should one fight such a decision with lawyers or ombudsman or both should it come?
3. Any comments on the use of loss assessors? I took one on to supposedly help me in this difficult time, but he seems to be a prophet of doom more than anything else.
4. Should tenants who cannot sleep in their rooms , but still use them for storage of belongings still pay rent, maybe at a lower rate?

Ian



Comments

Neil Patterson

8:31 AM, 20th August 2018
About 3 months ago

Ian,

What a terrible, frightening and dangerous situation.

LV are a massive well respected company so you will have plenty of recourse through the insurance ombudsman if it is required. Fingers crossed it isn't.

I do know there is a difference between accidental and malicious damage and there are different types of insurance.

I will get our insurance expert Jason and Tom to comment for us, but unfortunately Reich was before their time so he won't have access to actual the policy details.

James Barnes

9:34 AM, 20th August 2018
About 3 months ago

On your fourth question " Should tenants who cannot sleep in their rooms , but still use them for storage of belongings still pay rent, maybe at a lower rate?"

The property has a Prohibition Order on it until the fire alarm system is repaired. My first thought is that the Council would have had a duty to rehouse your tenants as they've effectively made them homeless by serving the Order. They may have refused assistance and opted to live in tents (you don't say) but as to whether they should pay rent for storage albeit at a reduced rate, my thought would be absolutely not. You don't say to what extent the Prohibition Order restricts occupation of the property e.g. for use as sleeping accommodation or fall all residential purposes. You may want to check though because if the Local Authority learn that you're charging rent on a prohibited property you may well be in breach of the Order.

Tom Chapman

9:59 AM, 20th August 2018
About 3 months ago

Hi Ian,

Sorry to hear of your situation. My understanding is that a HMO would normally indicate that it is a Bedsit. So seems strange that this is what LV are querying. It would be interesting to see a copy of the policy wording and LV's definition of a HMO.

Is there another underlying issue/non disclosure of information to them which could make them reject the claim?

If they do reject the claim, then I would certainly speak to the Ombudsman. Might be worth speaking to them now

The Loss Assessor should be working for you and your best interests as you appointed him.

If the Claim is successful then you can claim for the Loss of Rent and alternative accommodation.
With the Tenants living in the Tents, I would not be comfortable with them going in and out of the property to collect belongings if the building is not safe.
I would have a conversation with tenants regarding rent and it will depend on how long the property is uninhabitable for. If repairs are going to take 2 weeks then im sure they would be fine but if repairs are going to take 6 months. Are they going to be happy paying rent living in a tent in the middle of December with no heating.

Paul Maguire

10:19 AM, 20th August 2018
About 3 months ago

I had a similar experience 5 years ago when a new tenant [plus wife and young son] were given a tenancy on a cottage in the country by the then letting agent. 10 days later he lit a fire in the fireplace and then decided he could get it going better with a touch of petrol. Using a gallon jerrycan he tried to add the petrol to the small flame....which jumped to the jerrycan and caused him to drop it in fright. Flaming petrol spread across the floor and the family decided to exit quickly. £140k of damage but the insurance [Aviva] paid up without any quibble. Turned out that Landlord Insurance indemnifies you against idiot tenants whereas my home insurance wouldn't cover me if I did the same thing. From comments I've read online in the past about LV they sometimes need a bit of a push when it comes to paying out. I'd fight it.

Dr Rosalind Beck

10:33 AM, 20th August 2018
About 3 months ago

My advice is to tread very carefully and every time you are about to send LV an email, sleep on it so that you can consider it again before sending. I find dealing with insurance claims is a game of cat and mouse. I see their 'refusal' to pay out as the first stage of the battle. Slowly, slowly catchee monkey (or however it goes).

Yvonne Francis

10:51 AM, 20th August 2018
About 3 months ago

I am sorry to hear of your situation Ian. Any Landlords worse nightmare.

Could I clarify the point Tom made and say HMO's are not presumed to be bedsits as they can be shared houses. A shared house will have one lease with all the tenants having a run of the house and bedsits separate leases for each room with access just to their room, although in both cases the facilities and common areas can be shared.

This year, when I was renewing my policy, my insurance company UK Insurance emailed me to ask whether I was bedsits or a shared tenancy as bedsits were considered a higher risk. Luckily in my case I am a shared tenancy.

Mark Weedon

10:56 AM, 20th August 2018
About 3 months ago

Speak to your broker and get him to fight for you. It is in the event of a claim when you find out how good your broker is.

Ian Narbeth

11:08 AM, 20th August 2018
About 3 months ago

Hi Ian
If LV deny coverage (or if they try to cut down the claim unreasonably) I recommend you instruct a loss assessor to act for you to negotiate with the insurer and their loss adjuster.

You should ask Reich what they said to LV when presenting the risk to them. With the greatest respect to Tom Chapman, HMO does not automatically mean bedsit. None of mine are and I know many HMO landlords with the same set-up.

The point is whether being a bedsit is a material factor for the insurer and whether Reich, as your broker, raised the question with you.

Mike

11:12 AM, 20th August 2018
About 3 months ago

Yvonne Francis I am still a bit confused regarding your comments, is an HMO where each room is rented to individual household comprising of no more than two persons i.e. husband wife, two friends sharing the room, any two other people sharing one room in an HMO of say 3 rooms, with a total maximum of 6 occupants, each pair of occupiers have a tenancy agreement in their own names, each pays rent directly to landlord, so is this a bedsit or an HMO?
Will appreciate your answer to clear this confusion.

Ian Narbeth

11:30 AM, 20th August 2018
About 3 months ago

Reply to the comment left by Mike at 20/08/2018 - 11:12
Mike
Bedsits typically would have limited or no communal areas and would have a kettle and cooking facilities (such as a Baby Belling or a microwave) in the room. There might be a shared bathroom but no shared living rooms.

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