Since many of these flats are owned by landlords who let them to tenants or leaseholders, landlord insurance for flats represents a sizeable sector of the property insurance market.
Insurance for flats
The type of insurance covering the risk of loss or damage to a flat is notably different to other forms of property insurance.
The entire building, which is subdivided into flats – either purpose built or the result of a later conversion – requires protection against major risks, such as explosions, fire, flooding, impacts, escape of water, vandalism and theft.
The cost of that buildings insurance is typically borne by the freeholder of the block of flats, who recovers shares in the cost in the management charges received from individual leaseholders of the flats.
Leasehold and freehold landlords – building insurance
There are two possibilities for your role as the landlord of a flat or flats that you let:
- if you are the landlord of a leasehold flat which you then let to tenants, responsibility for building insurance is typically the responsibility of the landlord – and you contribute to those costs as part of the management fee you pay to the landlord; or
- if you own the freehold – of the entire block of flats, for instance – then building insurance is almost certainly your responsibility, and you may seek to recover the costs from the management fees you charge to leaseholders.
Whether you are a freeholder or leaseholder, however, your landlord insurance for flats also needs to provide cover for any items you own in the let property – this might extend to property in the common areas (such as lobbies and stairwells) or furnishings in the flats themselves.
Contents of flats owned by your tenants are their own responsibility, of course, and you might want to advise them to arrange suitable insurance.
Landlord liability insurance
As their landlord, you also owe your tenants a duty of care in ensuring that all reasonable steps are taken to avoid them, their visitors, neighbours or members of the public from suffering an injury or having their own property damaged.
If you are held responsible for any such loss or suffering, you may be liable for paying a significant amount of compensation – the landlord liability insurance typically included in landlord insurance for flats provides indemnity against such claims.
If you own the freehold, landlord liability insurance may be a component of the insurance you arrange for the entire block. But even if you are a leasehold landlord, you may not rely on any such protection, but need to ensure that you have adequate landlord liability insurance incorporated in the cover you arrange for the flat or flats you are letting.
Loss of rental income
Similar arguments apply to the provision for compensation for loss of rental income – typically included in landlord insurance for flats – following an insured incident which leaves some or all of the flats temporarily uninhabitable.
Once again, if you own the freehold, provisions for such compensation may be included in the insurance you arrange for the entire block; but even if you own only the leasehold, you may need such protection to cover the loss of rental income you are likely to suffer when there are no tenants paying the rent following such an incident.
Landlord insurance for flats, therefore, is clearly somewhat more involved and complicated than regular landlord’s insurance – and you may therefore wish to consult a specialist broker when arranging the cover you need.