Insuring an unoccupied rental property
When a house is left unoccupied long-term it can deteriorate. Damp often takes hold, leaks develop plus over-laden gutters and piles of junkmail can make it look unoccupied, which makes it a target for burglars and vandals.
This is why most insurers will not provide full cover when a property goes more than 90 days unoccupied.
But periods of unoccupancy are unfortunately a part of a landlord’s business - and it can take more than three months to undertake major renovations on a property.
Nigel Attwood, of Oasis Property Insurance, an experienced broker in property insurance, told Simple that for insurance purposes there were three main types of empty property.
Short-term unoccupied property
These included short-term, which are vacant for no more than 90 days while between tenants or waiting for a lick of paint; medium-term while more fundamental structural renovation is carried out which typically takes at least six weeks but no more than eight months and long-term where they might sit idle for months on-end untenanted or awaiting planning permission.
Nigel said: “Many insurers will treat a property as vacant if it is untenanted for more than four-six weeks and require special conditions to extend this to 12 weeks. However, fitting a new kitchen in six-eight weeks can be quite a challenge – getting it done within 12 weeks is often not.
“But, as far as an underwriter is concerned they would say that as long as you took the reasonable precautions you would take when going on holiday it should be fine. So, you should keep the heating on, secure the windows and doors and ensure the property is visited regularly to check security and avoid junk mail building up inside the door.”
Medium-term and long-term unoccupied property
Medium-term unoccupied property was not as attractive as a 6 to 12-week short-term period from an insurer’s point of view, said Nigel, but not necessarily a big problem risk as long as a landlord could demonstrate that there were clear plans for the property as an investment, rather than just a development project.
But long-term vacant properties presented more of a difficulty.
He added: “Where a landlord cannot demonstrate that they expect a property to be tenanted in the next month or so and it is just sitting empty while they decide what to do with it that is a scenario where we may find exclusions to certain risks.
“If you take malicious damage for example, where people are wandering past and smashing windows, this can hit a landlord hard but can often be covered depending on where a property is and what security there is.“If the property is in a safe location and well-secured landlords can generally buy back malicious damage cover but if it is in a less desirable location with no security this can be an open invitation to vandals and present more of a barrier when obtaining cover.”
And the added risks associated with a long-term unoccupied property present extra responsibilities for its landlord.
As soon as its unoccupied period goes beyond 90 days, in the event of a claim being made a property’s landlord must be able to demonstrate that regular inspections have been carried out.
“If you have a relationship with a relative or a neighbour,” said Nigel, “or can get a local agent to document that windows are secure, doors are locked and there are no water leaks you need to have them make the checks once a week.
“When a claim is made the insurer will want a record of these checks sent over – as long as this can show that regular checks were made during the period of unoccupancy there should be no problem.”
The temptation may be to forge such documents but most insurers have means of exposing dishonesty.
Nigel said: “If a loss adjuster looks at a claim and sees a damp patch on the wall which has been there for three weeks they will question it.
“Legally-speaking an insurance agreement is made in the outmost good faith so if a loss adjustor suspects dishonesty they may start doubting other aspects of a claim.”
Sometimes medium-long-term unoccupied periods are unavoidable when, for example, seeking planning permission and landlords should be prepared to pay substantially more for these policies – often at least double for medium-term and up to five times as much for a long-term vacant property.
You can find out more about insuring unoccupied properties by emailing email@example.com, visiting oasispropertyinsurance.com or phoning 01903 831371.