Tenancy Agreements 31 days of tips – Day 21 – insurance

This is day 21 of my 31 days of tips on tenancy agreements series. To see the rest of the series click here.

Dealing with insurance

There are two types of insurance to consider here – the landlords insurance and the tenants insurance.

Landlords insurance

Most landlords will have insurance cover.  If you don’t you should have – your property is a valuable financial asset which you are handing over to strangers.  You need some protection.

You will also want to be sure that your insurance is not being invalidated by your tenants, or if it is, that you have the right to claim against them for your losses.  And here is where the drafting points come in.

Under the Unfair Terms in Consumer Contracts Regulations, it will be considered unfair (or so the Office of Fair Trading consider, and I have to say that I agree with them) if you try to make tenants responsible for complying with terms and conditions which they  have never seen.  So you need to provide them with a copy, either of the whole of your insurance policy, or an extract of the relevant parts.  So that they know what type of behaviour to avoid.

If you don’t do this, then your clauses aimed at making your tenants responsible (for example) for additional premiums payable because of their conduct, are likely to be found void.

If you do not have insurance, you are taking a great risk.  Indeed as it is generally assumed that landlords will have adequate insurance, there may be problems in recovery from tenants if they cause damage, on the basis that you have failed to mitigate your losses.

Tenants insurance

The insurance that you take out will normally only cover the fabric of the building and your own fixture, fittings and contents.    It will not cover your tenants possessions.  They need to be made aware of this, and told that they need to arrange their own cover.

However it seems that, from reading the OFT guidance on unfair terms on tenancies, that some landlords are going further and offering insurance policies to their tenants.  And others are going even further and insisting that their tenants take out specific policies (upon which no doubt they will be earning a commission).

The OFT say, and once again I entirely agree with them here, that this is not something you are entitled to do.  Any contract term which requires tenants to buy insurance products from you, will be void.  And if you are a member of any professional organisations, this is something the tenants can complain about to them, and which the organisation ought to penalise.

Do you have any comments on this section? Have you come across landlords trying to sell insurance to their tenants?  Have you known any cases where landlords have tried to claim from tenants instead of having insurance cover?

NB Read about my tenancy agreements service here.