Loophole in Landlord Insurance
A couple who had lived in their home for 30 odd years decided to go abroad to do voluntary work for a charity. They rented out their treasured home to a couple. All was well for the first 2 years and then one of tenants lost their job. Despite claiming housing benefit, the rent was not paid and the arrears got out of hand. The couple decided to come back and try and sort things out.
To their dismay, they found their home had been transformed into a cannabis factory and a substantial amount of damage had been done to the property. The tenants not only refused them entry but refused to move out, so the landlords had to have them evicted through the judicial system which took some five months at a cost of around £2,500.
Unfortunately, there was no rent guarantee is place, however, the landlords did have buildings and contents insurance – or so they thought! This is where the nightmare began.
The landlords had dutifully and correctly informed their insurance company they were going abroad and would be renting out the property and this was all noted on their policy, however, when they put the claim through; they were told they would not be paid out. The insurance company informed them that the reason they would not pay out, was because in the small print it stated part of the exclusions were ‘any loss or damage caused by persons lawfully in the home or malicious damage by tenants…’
The landlords were absolutely devastated. The costs were around £56,000 in total to put the property back to its original state, so they reported it to the financial ombudsman claiming they were miss-sold the policy. The ombudsman upheld the decision as the small print was very clear that it would not cover malicious damage caused by a tenant.
An additional and interesting twist to this case though, is that if they had taken out a policy that did cover them for any damage caused by a tenant, the probability of the insurer paying out would have been a nil again. This is because the landlords had not conducted a property visit in the 2.5 years they were abroad.
So… the moral in this story is to check your policy and read the small print, make sure you are covered for malicious damage (as the majority of policies does not include this) and make sure you are conducting regular property inspections. I would also go one stage further and document all your visits with your findings (even if a good inspection with nothing to report) and ensure a written report has a paper trail (ie proof of postage, or proof of email) with a dated photograph of the property (be it the garden, kitchen or bathroom).
I recently relayed this story to a client, who subsequently checked with his insurer and was told they were not covered for malicious damage. Forewarned is forearmed as they say and I do hope it never happens to you.