Insuring rental property against criminal damage

There have been a number of stories in recent months about how landlords have suffered costly damage to their rental properties and have not been covered by their insurance policies. Such stories highlight the importance of carefully scrutinising what is and isn’t covered in your landlord’s insurance policy.

Illegal activity

Two examples from just this month are concerning cannabis farms. The use of rental properties as cannabis farms has grown increasingly widespread, and many police authorities have issued warnings to local landlords advising them to be on the lookout.

One landlord found himself with a huge repair bill when his Suffolk property was gutted by cannabis farmers; they had bypassed the electrical meter, knocked down walls and converted the garage into a sleeping space. His insurance policy excluded malicious damage from illegal activities, and he had to pay the entire bill himself.

Another landlord in Cardiff was uninsured altogether, and found himself £60,000 out of pocket to repair a property that had suffered from fire damage. The fire was caused by amateur wiring bypassing the electricity meter – again, for the purpose of cannabis growing.

Vandalism

A further example came from last year when, following an argument, an angry tenant left his landlord with £12,000 worth of damage. The destruction included vandalised fixtures and fittings, abusive graffiti and animal faeces, which the Blackpool landlord believed may have been caused by intentionally breeding dogs in a ‘makeshift cot’. The landlord was not fully covered, as his policy excluded damage caused by animals.

Common exclusions in landlord insurance policies

Accidental damage: Accidental damage is not always excluded, but cover is inconsistent from one insurer to the next. Some policies include damage caused by children, for example, whilst others don’t.

Many accidental damage clauses can be extended to offer additional cover. Remember, though, that your tenants should insure their own belongings – you are only obliged to ensure the structure of the building and any belongings you provide as part of the tenancy.

Animals: Chewing, fouling, scratching and tearing damage caused by animals are, as the unfortunate landlord from Blackpool found out, often not covered.

Arson: Whilst fire is a ‘peril’ which is usually covered (though you should of course check), arson – the act of deliberately and maliciously setting fire to another’s property – is likely to be considered malicious damage (see below).

DIY: Sometimes damage caused by attempts at amateur repairs will not be covered. This might also include damage caused by cleaning. Insurers often won’t cover damage unless the job was completed professionally, but a professional trader should also have professional indemnity insurance.

Insects, vermin, and infestation: Damage caused by ants, cockroaches, rats or any other type of pest is often excluded from landlord’s insurance cover.

Liability: Public liability insurance is a different type of cover, but a comprehensive landlord insurance policy might include it. This will cover you if your tenant or another member of the public is injured due to an accident on your property and claims damages.

Malicious damage: Malicious damage by your tenant (or by anyone when the property is vacant) is frequently excluded. This can also include a restriction for illegal activities, such as with the cannabis farm example given above.

Where an insured peril might be covered but this can be argued to be as a result of malicious damage, an insurer may reject the claim. For instance, water damage may be covered, but if the damage was the result of the tenant deliberately vandalising the water pipes it may not be.

Returning to the second example of cannabis-growing, it is unlikely that the landlord would have been able to make a claim even if he had a standard insurance policy – the fire would likely have been attributed to malicious (criminal) activity by his tenant.

Always read the small-print

As each policy offers different levels of cover, it is vital to know the full extent of what is and is not covered and query anything about which you might be unsure.

This information should not be interpreted as financial advice. Buy to let mortgage rates are subject to change. Speak to our advisors for a mortgage illustration.

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