Empty Building Insurance for Landlords

Empty property insurance can be quite difficult to obtain from mainstream home insurance providers. Most companies will view that if a building is left unoccupied, it becomes a 'poor risk' for buy to let insurance purposes. Empty properties are more likely to have insurance claims compared with homes that are lived in and regularly maintained. This is because the impact of the same risks means claims become more acute. Statistics show unoccupied buildings produce more claims. For instance freezing weather can cause burst pipes. So if no one is at the property to resolve the problem quickly, the water damage to the building can be substantial. Another big risk is vandalism and burglary - particularly if the property does not look lived in. Even if the property is not boarded up, but instead is left unoccupied between tenants moving in and out, problems can occur. Quite often landlords purchase properties well away from where they live in order to target a specific market segment. So it takes longer to get the property to deal with emergencies such as break-ins, blocked drains, burst pipes or broken roofs.

Some insurers will take a more lenient view on whether or not to insure an empty or unoccupied building. Their view will largely depend upon the state of building and the owner's future plans for it. For instance if a landlord is in between tenants but owns a nice new modern apartment, the insurer may be quite comfortable. However if the building was completely boarded up, in a rundown area, in a poor state of repair, and the owner planned to get rid of it in an auction - most insurance would be extremely cautious about taking on such a risk. Another typical example is finding adequate insurance cover for an older property (purchased for letting purposes that needs renovation), prior renting it out to tenants. Here the insurance policy may have a contractor's exclusion clause. So if builders or other third party contractors (such as surveyors, inspectors, tradesmen are to be at the address during the construction and redevelopment phase) - the insurer may wish to exclude any damages caused by the third party contractor.

The number of empty properties currently in United Kingdom is rising, due to the recession and credit crunch. These economic conditions have caused a number of dilemmas. On the one hand as first-time buyers struggle to get on the property ladder, and are forced into rented accommodation -  existing landlords are enjoying increasing rental returns. On the other hand as many more people lose their jobs, the instances of tenants failing to pay their rent and being evicted is on the rise. As a result an increasing number of buy to let investors are struggling to sell their properties, which are being left empty and for sale for long periods of time.  Likewise there is an increasing number of situations where an older relative has passed away, bequeathing their home to their offspring. Many are being forced to let it out, as they can find buyers willing to purchase it. This can present difficulties for existing insurance policyholders, as the usage of the property has changed unexpectedly.

If you are an existing landlord, you should check in your policy wording how your existing insurer defines an 'empty building'. There are two usual measures used to determine whether a property is empty/unoccupied or not. Firstly is it furnished? Are there enough furniture and fixtures in the property for it to be lived in? Just placing a couple of chairs and tables won't do. Most buy to let insurance companies would consider the property to be empty. Secondly how many consecutive days has it been lived in? Generally if the property has not been lived in for a period of 30 consecutive days, it is usually deemed by insurance companies to be 'empty'. The number of days may vary by insurance company. Most standard buildings and contents insurance policies will contain an un-occupancy clause, (which may restrict the levels of covers you would received at the property), had it been lived in. In addition you may also find that there are warranties and terms and conditions that apply to the insurance. For instance one of the most typical, is that the property has to be inspected at least every 14 days. The property check could either be done by the landlord themselves, or (if it is located a long distance), by the landlords local letting agent.

Some insurance companies specialise in providing empty property insurance for landlords, that cover a wide range of letting situations. As such you can obtain a much wider range of perils than from a standard home insurance provider. You should still check the policy wording carefully, to ensure it will protect your investment and meets you individual situation and insurance needs. In particular the policy wording may stipulate 'what you are required to do', in order that the policy does not become invalid. Failure to carry out the actions listed in the policy wording may render any future insurance claim invalid. These warranties or endorsements are generally designed to prompt you to take practical actions that you might find time-consuming. If you do make an insurance claim in the future, your landlord insurance company is likely to ask for proof of dates and times, of when you carried out your inspections. So it is a good idea to create a reminder checklist, so you remember to visit each room, check windows are secure, check any automatic timers for heating and security lights are working properly. Sometimes the insurance company will want you to switch off the electric's, drain down the water and switch off at the mains water stopcock. Others will want you to tape up the letterbox.

By their very nature most properties are not left empty indefinitely, as the owner will be desperate to make use of the asset in some way or another. Therefore empty building insurance policies are specifically set up to cope with the short-term mentality of landlords. For instance, cover may continue on a rolling monthly direct debit basis, until such time as the property is sold. At which time the policy can be cancelled, and the direct debit stopped - or in some cases the policy may be converted to a more suitable form.