Is buildings insurance a legal requirement for landlords?
- There is no statutory obligation for a landlord to take out buildings insurance, but most buy-to-let mortgage lenders require it as a mortgage condition. Operating without buildings insurance on a mortgaged property is likely to be a breach of your mortgage terms
- For unencumbered (mortgage-free) properties, buildings insurance is not legally required but is fundamental risk management, rebuilding an uninsured property after a fire or flood would be an uninsured loss
- Leasehold flats: if you own a leasehold flat, the freeholder is typically responsible for insuring the building under the terms of the lease. The service charge will include the cost of the freeholder's buildings insurance. You may only need contents insurance for your fixtures and fittings
- HMO properties: some buildings insurers exclude HMO use from standard landlord policies. Ensure your policy explicitly covers HMO use if the property is licensed as an HMO
- The key principle: a domestic buildings insurance policy does not cover a property being let to tenants. Always use a specialist landlord buildings insurance policy, a domestic policy on a rental property is likely to be void on a claim
What landlord buildings insurance covers
- Standard landlord buildings insurance covers: damage from fire, flood, storm, burst pipes, subsidence, vandalism, and malicious damage. It covers the structure of the property (walls, roof, floors, fixed fittings) and often landlord's fixtures and fittings
- Landlord liability: most landlord buildings policies include property owners' liability cover (typically �2�5 million), protecting the landlord if a tenant or visitor suffers personal injury due to a defect in the property
- Loss of rent: many policies include loss of rent cover if the property becomes uninhabitable following an insured event (e.g. fire or flood), covering rent lost while the property is being repaired. This is a valuable feature: check the cover period (typically 12�24 months)
- Malicious damage by tenants: standard policies often exclude malicious damage by tenants. Specialist landlord policies or add-on covers provide this protection, important for landlords operating in challenging rental markets
- Contents: landlord buildings insurance does not cover the tenant's belongings (the tenant must arrange their own contents insurance). For furnished lettings, a separate landlord's contents policy covers fixtures and fittings you supply
Calculating the rebuild cost, avoiding underinsurance
- The sum insured for buildings insurance must reflect the rebuild cost (not the market value) of the property. The rebuild cost is what it would cost to demolish and rebuild the property from scratch, including professional fees and site clearance
- Market value ? rebuild cost: in many areas, the market value exceeds the rebuild cost (particularly for older terraced properties). In some areas (inner London, conservation areas), the rebuild cost can exceed the market value due to specialist construction requirements
- Underinsurance: if you insure for less than the rebuild cost and suffer a total loss, the insurer will apply 'average', paying only the proportion of the loss corresponding to the proportion of the rebuild cost you insured. For example, insuring for 50% of rebuild cost results in only 50% of any claim being paid
- BCIS rebuild cost calculator: the Building Cost Information Service (BCIS) publishes rebuild cost data by property type and region. Many insurers use BCIS data to calculate the rebuild cost, use the BCIS online calculator or ask a surveyor to confirm the rebuild cost for your property
- Review annually: rebuild costs increase with construction cost inflation. Review your sum insured each year and adjust if necessary, most policies offer index-linking but check that the index is keeping pace with actual rebuild costs
Void periods and landlord buildings insurance
- Many landlord buildings insurance policies impose conditions during void periods (when the property is empty between tenants), typically requiring the landlord to inspect the property at least every 7�14 days, turn off the water at the mains, and maintain minimum heating
- Failure to comply with void period conditions can result in a claim being declined, for example, if a burst pipe causes �20,000 of damage during a void period and you did not inspect the property in the preceding 14 days as required by the policy
- Notify your insurer before a void period begins: some policies require notification of expected void periods. Failing to notify can affect coverage
- Extended void cover: if the property is expected to be void for more than 30�60 days (e.g. during major refurbishment), notify your insurer. Standard policies may not cover extended voids, specialist unoccupied property insurance may be required
- Security: some insurers require that during a void period the property is properly secured (all locks in working order, windows secured). A break-in through an unsecured window during a void period may result in a reduced or declined claim
Making a landlord buildings insurance claim, the process
- Notify your insurer immediately after the damage occurs, most policies have a notification requirement. Delayed notification (days or weeks after the event) can affect the validity of the claim
- Document the damage: photograph all damage before any emergency repairs. Emergency repairs (to prevent further damage, e.g. boarding a broken window) are usually covered and should be authorised by the insurer before being carried out if time allows
- Loss adjuster: for large claims, the insurer will appoint a loss adjuster to assess the damage and agree the repair cost. You can appoint your own public loss adjuster to represent your interests, useful for complex or large claims
- Tenant belongings: make clear to the tenant that their belongings are not covered by the landlord's policy. Tenant contents insurance is a separate matter
- Rebuild timeline: if the property is uninhabitable following a major loss, work with the insurer to agree a repair timeline and confirm that loss of rent cover will operate for the required period