Renting and Insurance

Renting and Insurance

While insurance of a let property itself is fairly straightforward (the landlord has a responsibility to insure the building to the full replacement value, and would be pretty short-sighted not to want to do so in any case) insurance of the contents often causes some confusion. 

The landlord’s buildings insurance will cover damage to the building structure.  A good landlord-specific insurance will extend to cover the costs of temporarily re-housing the tenant in the event of the property becoming uninhabitable as a result of fire, flood or similar, although insurers are increasingly becoming reluctant to provide such cover in the case of flooding.  Tenancy Agreements should have a clause enabling the tenancy to be terminated early in the absence of such cover if the property becomes uninhabitable as a result of and Act of God (Force Majeure).  This will enable the parties to abandon the tenancy if circumstances make that the only realistic option.

The landlord’s insurance should also cover damage to his own contents within the property – carpets, white goods, etc., and it would be appropriate to claim against that cover in the event of, for instance, damage caused by a plumbing leak.   But what about damage caused by the tenant?  Most tenant damage is the result of an accident – the inevitable spilled wine, for example, rather than deliberate, but whether deliberate or accidental it is not appropriate that the landlord makes a claim and perhaps prejudices future premium rates, when he is not himself at fault.  For that reason Simply Let’s standard tenancy agreement requires tenants to maintain contents insurance cover against damage they might cause to the landlord’s property. 

What then about tenants’ own property?   While it’s clearly sensible for tenants to have insurance in place against damage caused them to their own belongings, and while Simply Let recommends tenants to do so, landlords and agents can’t insist on that.  Indeed there has recently been a case where a well known tenant referencing company and insurance provider has been taken to task by the Office of Fair Trading for encouraging letting agents to make such cover mandatory on tenants.  Most contents insurance will also cover loss of items outside the property – i-pod, phone or even bicycle, so it’s well worth considering. 

Whatever cover you are looking for, you do need to check the small print carefully to ensure it's what you really need or, if in doubt, arrange cover through a BIBA approved broker.  Although not financial advisers, Simply Let are authorised introducers for Homelet insurance for both landlords and tenants, and we will be pleased to assist you with any enquiries regarding that.

Letting Agency Fees

Remember that tempting £10.99 flight to Paris which actually cost you £109?  Are you sure your letting agent isn’t operating a similar pricing strategy?

Most landlords searching for a letting agent focus on the agent’s commission rate. At Simply Let we charge 12.5%. Some are more expensive and some will charge less, but we believe that 12.5% is about right for what we do and the expertise and professionalism we bring to the task.

However you need to look behind that headline rate to discover what other charges you might be faced with.  We’ve heard of agents making exorbitant charges to their clients each time a new tenant moves in and even of agents charging their client each time the contractual tenancy period ends even although the same tenant is staying put (Foxtons-Case).  We hear of letting agents charging prospective tenants dear for referencing and even for checking them in to their new home.  Such charges could well act as a disincentive to tenants and so prolong the time taken to secure a new tenancy.  Simply Let is transparent about the fees and costs it charges to both landlords and tenants, and that information is available on request.

Pre-tenancy charges to tenants are illegal in terms of the Housing Acts although many agents (Simply Let included) take the view that a charge for referencing applicants is not unreasonable.  However, we believe that such a charge must relate to the actual costs involved instead of being as high as prospective tenants will bear.

At Simply Let we take the view that we owe a duty of care to the landlord (who is or client) and we treat our client’s property just as if it were our own, seeking responsible tenants who are likely to stay, and so minimising void periods which are the most expensive times for our client.  That is our duty as professionals.  Some agents must surely relish changes of tenancy, seeing them as an opportunity to impose charges both on their landlord client and on applicant tenants. 

So landlords, where does your agent’s loyalty really lie and how much are those attractive commission rates really costing you?  Are those charges to tenants perhaps acting against your own interests?  Tenants, why not challenge that expensive referencing or “administration” fee or even ask the agent how it squares with the statutory prohibition of pre-tenancy charges?

J R Gell MRICS

Director

Simply Let Ltd.

Tenancy Deposit Scheme

Tenancy Deposits – The New Arrangements in Scotland

Tenancy Deposit protection has been in force in England and Wales for several years and now Scotland is to follow suit with its own scheme.  Whether you welcome this or shudder at even more government involvement probably depends on your perspective and experience.  All we can say is that at Simply Let we have hardly ever had a deposit retention disputed.  It seems to us that, with a detailed inventory agreed by both parties at the commencement of a tenancy, then through common sense and honest discussion over any issues arising at the end disputes can be avoided, and it makes me a little sad to see honest human interaction being replaced by bureaucratic process.  Be that as it may, we are to have a scheme in Scotland.

Although the enabling Regulations were enacted some time ago, the Tenancy Deposit Scheme will come into effect only when one or more providers are approved by the Government. This is widely expected to happen early this summer.

Currently there are two contenders being considered to run the scheme; SafeDeposits Scotland and the Letting Protection Service Scotland, and it is widely anticipated that both will receive Government approval.

 SafeDeposits Scotland describes itself as an innovative partnership between landlords, agents and tenants and comprises the following bodies.

• Scottish Association of Landlords (SAL)
• National Federation of Property Professionals (NFOPP)
• Royal Institution of Chartered Surveyors (RICS)
• The Scottish Council for Voluntary Organisations (SCVO)
• Shelter Scotland
• National Union of Students Scotland (NUS Scotland)
• The Dispute Service (TDS)

It is -

• a not-for-profit limited company registered in Scotland.
• supported by the Dispute Service which is already operating in England.
• based in Scotland with an office in Glasgow and Edinburgh (We believe that they are looking to have a presence in Inverness also).

Full details are on the SafeDeposits Scotland website at http://www.safedepositsscotland.com

Letting Protection Service Scotland (LPS)

• a subsidiary of Computershare Investor Services plc, a company registered in England and Wales.
• based in Bristol.
• already operating one of the deposit schemes in England and Wales.

Full details are on the Letting Protection Scotland website at http://www.lettingprotectionscotland.com/

So how will the schemes work?

• Both will be completely free to use
• Both will offer online payment of deposits as well as by cheque.
• Both will offer a dispute resolution service with independent adjudicators.

When must deposits be protected?

The scheme will come into effect when the first provider is approved.  This is expected to be about May this year, but some time slippage is quite possible.  When deposits must be lodged will depend on whether the tenancy is in existence when the first scheme becomes operational or whether it commences after that date.

All deposits received after a scheme first becomes operational must be submitted to an approved scheme, and information provided to tenants within 30 working days of the start of the tenancy.

Landlords already holding deposits before a scheme becomes operational must also lodge those deposits but will be allowed up to nine months to submit them to an approved scheme, according to the status of the tenancy.

What happens if a landlord uses a letting agent?

The duties in relation to tenancy deposits apply to landlords, irrespective of whether an agent might be taking and currently holding the deposit.  However, although the obligation falls on the landlord, the agent can lodge the deposit on the landlord’s behalf.

It is important to realise that any sanctions imposed as a result of non-compliance with the regulations would apply to the landlord and not to the agent and, since the penalty for non-compliance can be up to three times the amount of the deposit, landlords using an agent should satisfy themselves that the agent is acting in accordance with the Regulations.

In future blogs, I'll summarise how the lodgement and reclaim processes are to work and run through what happens if there is disagreement between landlord and tenant.    

J R Gell

Director, Simply Let.