Subletting insurance wake-up call for landlords

Subletting insurance wake-up call for landlords

0:02 AM, 8th January 2024, About 5 months ago

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One of the biggest challenges facing landlords is they simply don’t realise they need subletting insurance.

Subletting poses a real threat to landlords, especially if a tenant is subletting without permission. Landlords need to be aware that standard landlord insurance will not cover subletting.

At Property118, we’ve teamed up with The Home Insurer who can help with a variety of landlord insurance issues and here we explain more about the problems landlords can face.

Subletting insurance implications

Data from Direct Line Business Insurance reveals almost half (48%) of renters who sublet their properties did not disclose this to their landlord.

Even worse, more than three-quarters (77%) of renters did not review their existing lease agreements to determine if subletting was allowed before doing it anyway.

One in 10 (13%) of renters admit to renting out part of the rented home they currently live in, ranging from a single room to the entire property. This rises to 25% among younger people, aged 18 to 34.

Gary Holmes, the landlord product manager at Direct Line Business Insurance, told Property118: “There could be serious consequences for tenants who sub-let, but landlords need to be aware that in these circumstances there could also be insurance implications for them.

“Sub-letting is not covered under most insurance policies, so it’s really important that landlords make their tenants fully aware of the restrictions on the lease and maintain communication to help prevent any breaches.”

Standard landlord insurance won’t cover it

One aspect of subletting that landlords may not realise is if the local council is putting benefit tenants into their properties, they need to have a separate insurance policy which covers this.

Jason McClean, director of The Home Insurer, explains: “We have landlords come to us who sublet and some of them don’t even realise.

“Landlords might sometimes have a local council putting in benefit assisted tenants into their properties, and the contract is between the landlord and the council, but the tenancy is between the council and the tenant which needs a totally different sort of insurance.

“You need sublet or rent-to-rent insurance – standard landlord insurance won’t cover it.

“Many landlords don’t see that and just stick their head in the sand and go to another insurance company to find the cheapest quote possible and if they’ve had a claim, they’ll get it refused which is a real shame.”

The Home Insurer can help with a variety of specific requirements for landlords, including subletting insurance.

Jason said: “We can solve these problems for landlords if they have mixed tenancies and benefit tenants; you name it we can deal with it.”

How can you protect yourself from subletting

With the rise of Airbnb, many landlords are finding that tenants are subletting without permission which can cause chaos for their investment.

One way to make sure that subletting isn’t taking place is to ensure you make regular property visits, especially if you have a holiday let.

Chris Norris, policy director for the National Residential Landlords’ Association, told Property118: “Subletting in the PRS can take several different forms, but the one consistent element is the need for a tenant to obtain permission from their landlord if they want to let part or all of their rental property.

“At its most extreme, non-contractual sub-letting can see entire properties let to other households on a long-term basis, or homes being let short-term via platforms like Airbnb.”

He added: “This can cause all sorts of problems for landlords in relation to licensing conditions, overcrowding, freeholder conditions or covenants, as well as presenting serious legal complications should their original tenant default in some way.”

Mr Norris says that illegal sublets can also cause disruption and misery for the local community.

He said: “Aside from being a clear violation of the terms of a tenancy agreement, illegal sublets can also cause disruption and misery for neighbours and the local community as sub-tenants are unlikely to have been vetted in any way.

“If landlords suspect their tenants are illegally subletting, we recommend that they arrange to inspect the property to ensure it is being used for its proper purpose before exploring all legal options which are open to them.”

Contents insurance for tenants

Tenants need to know that their contents insurance will also not be covered in the case of illegal subletting.

Direct Line’s landlord product manager, Sarah Casey, said: “Tenants need to be aware that their contents insurance is very unlikely to cover any theft or damage to personal property in the event of subletting.

“It’s important that landlords perform regular checks on their rental property to ensure that only those listed on the tenancy agreement live at the address.

“Should they become aware of any changes, it’s important that they deal with the situation swiftly and notify their insurer to make sure they have the appropriate landlord insurance in place.”

Catching landlords off guard

Subletting is becoming a huge problem for the private rented sector, catching many landlords off guard.

The potential risks with subletting will include property damage which can pose a huge – and expensive – threat to landlords and their property.

The most efficient way to get a personal quote with the best price and cover possible is to call the team on 01832 770965 so we can focus on your enquiry when you are ready and sitting down with your portfolio details to hand.

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