Letting out residential property is a great way for landlords to generate a sizeable income, especially with the difficult economic climate seeing many people struggle to access mortgage finance, but it is important that you put in place measures to protect your investment. This is particularly the case if you are renting homes to high-risk tenants.
For a wide range of reasons, people such as students, asylum seekers and those with criminal records can struggle to rent properties, partially due to perceptions they carry a higher level of risk with the landlords of the homes they stay in will be more likely to have to make a claim.
Of course, that’s not to say everyone who falls into the above demographic will be an unreliable tenant, but if you do intend to let out homes to someone with unusual circumstances you ought to need to think about taking out non-standard home cover.
If you are letting properties to high-risk tenants, you should prepare for the greater probability that there may be times when they have problems paying the rent. While situations like illness or losing your job are stressful and unpleasant, this happening to your tenants does not change the fact that mortgage payments on the house or flat they are renting from you still need to be made.
Having a good-quality insurance policy in times like these, however, should guarantee that you do not lose out financially because of residents’ financial problems and that repayments on the home loan will be made.
Of course, it is not always possible to predict when, if at all, someone will be made redundant, see their business fail, get divorced or develop other circumstances that impact their tenancy, but you should still carry out checks into a person’s background to assess the likelihood of them having any potential problems with payment.
Whether you choose to ask for references from a tenant’s previous landlord or current employer, you can make an informed decision about what risks they might pose and what level of insurance you should obtain to help protect against these.
It is also worth bearing in mind that while you are legally obliged to have buildings insurance for any properties you own, it is on the onus of tenants to take out contents cover for their personal possessions.
Failing to do so means that any of their items that need fixing or replacing in the aftermath of an event such as a fire or flood will have to be paid out of their own pockets, although any damage to the physical structure of the home will be covered by your own buildings cover.
To avoid any potential conflict between yourself and a client, it is a good idea to remind any tenants who take up residence in your homes that they will need to get their own contents insurance as early as possible.
If there is some kind of conflict between you and a tenant towards the end of a rental contract – perhaps a dispute over what you see as malicious damage, but a client blames on you, cannot be amicably solved – a good-quality insurance policy can help in the event the case goes to court. Here, any legal expenses – such as solicitors’ fees and bailiffs and court costs – will be covered, so you shouldn’t be left to pay these expenses, which could run up into several thousand pounds.
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