An increasing number of landlords and letting agents are demanding that tenancy liability is in place, but is this good for the industry, or is such a mandatory requirement a recipe for abuse?
Many landlords believe that having the requirement for tenancy liability insurance included in tenancy agreements is a way of ensuring that damage not covered by a deposit can be repaired without causing them financial loss, and there are certainly many insurance providers keen to jump on the bandwagon and make the most of the current trend.
The sister company of FCC Paragon, Paragon Advance, for example, has just launched its own tenants liability insurance offering either £5,000 or £10,000 cover for damages to a rental property’s fixtures and fittings.
Many providers, including Paragon Advance, are offering tailor-made policies, meaning that tenants can choose to have their own contents insurance and a stand-alone tenants liability policy, or they can combine both into one policy.
On the face of it, this seems to be beneficial to tenants and landlords alike. Accidents do happen and such a policy could offer tenants peace of mind, whilst giving landlords added confidence.
Yet, there are also potential pitfalls to consider. Are landlords who insist on their tenants having liability insurance giving the residents of their property the green light to not take as much care of their property? Is there a risk that tenants will sometimes cast caution to the wind, believing that any damage will be covered by the insurance policy?
If this is the case, even landlords who can recoup the full cost of repairs, may face lengthy – and costly delays – when it comes to renting out the property again after a tenant has left. A ‘careless tenant’ could leave behind extensive damage that, although covered by insurance, may well leave a landlord not only waiting for their financial redress but also for the practical repairs to be carried out.
There is the train of thought, however, that a tenant willing to act recklessly because of the presence of liability insurance, would most likely have acted in this way whatever the circumstances. An irresponsible tenant may well be willing to risk the loss of their whole deposit, simply not caring whether or not this will ultimately be enough to cover the cost of repairs.
Sadly, this has always been the risk that landlords have been forced to take, protecting themselves as much as possible through comprehensive vetting, check-in/check-out and inventory procedures.
Stipulating mandatory liability insurance undoubtedly adds another layer of protection in many landlords’ eyes, although there is another risk to think about. Until the day when all tenants are required to have such insurance in place – if that day ever arrives – are landlords limiting the number of tenants they will attract by adding this requirement to tenancy agreements?
Some tenants may be put off by what they consider to be an over-zealous collection of rules and regulations, whilst others will simply feel they do not have the additional funds to cover monthly insurance premiums.
Will a few landlords feel the need to lower rents to take into account this additional cost to tenants? If so, would another form of insurance be better placed to meet their needs?