Letting a HMO? You’ll need specialist insurance 10 Mar 2023
Houses in Multiple Occupation (HMOs) are a very different type of let to a single-household rental. In addition to greater property and tenant management demands, the legal regulations are tighter, particularly around fire safety, and you may need to secure an HMO licence. This is mandatory if you’re letting to five or more individuals and may be required by your local authority for smaller HMOs.
Because of the increased risk around letting to multiple unrelated tenants, ordinary landlord insurance won’t cover HMOs, so you will require specialist insurance. And because this is a niche market, not every insurer offers it.
What should HMO insurance cover?
Like ordinary landlord insurance, an HMO policy will include building insurance and cover for contents, including accidental damage by tenants.
However, given that HMOs tend to be larger properties, it’s usually considered that there could be a greater risk of fire breaking out and the property being damaged, and they’re likely to be substantially furnished, so the cover level may need to be higher and therefore your premium will be more expensive than for a single let.
Then there are three other key areas where you should have additional cover:
- Malicious damage. While many standard landlord policies will cover you for accidental damage, when letting an HMO you should ensure that you’re also covered if tenants or any visitors deliberately damage your property or its contents.
- Landlord liability. This is in case a contractor, tenant or visitor is injured inside your property and sues you for compensation – for instance, if they tripped on a loose tile on the bathroom floor and broke their arm. This cover can protect you against claims for injury or damages and pay for compensation and legal fees.
Given that you may have cleaners and contractors attending a HMO on a fairly regular basis, and your tenants are likely to have multiple guests – especially if it’s a student let – it really is important that you protect yourself financially with the right level of liability cover.
- Third-party theft or break-in. Although most landlord insurance policies will cover theft, the policy may only pay out if there’s been forced entry to the property. In the case of HMOs, when you’ve got many unrelated individuals coming and going at different times, there’s an increased likelihood of windows and doors being left unlocked or even open. And younger tenants and students may be more likely to lose their keys, which someone could then use to gain access to the property.
So, with HMOs, it’s important to check that your level of theft cover is suitable for the type of tenants and let and you know exactly what the exclusions are.
Your insurer will also need to know how many tenants will be living in the property and also what type of tenant they are – e.g. working adults, social housing tenants or students. If you’re letting to students, insurers may adjust their terms, cover and pricing to reflect the increased risk that there may be multiple visitors to the property and an increased likelihood of parties. And it’s important to be aware that if you misinform your insurer about your tenants, it can invalidate your policy.
Be aware that in the event of a claim, you will have to provide evidence that you had complied with all your legal obligations as a landlord, so it’s vital you know exactly what the requirements are for letting an HMO legally and adhere to the terms of any licence you may be required to hold. If you’re found to be in breach of any of these terms or legal responsibilities, your HMO insurance may no longer be valid.
Finally, again, you need to know that if you let a property as an HMO and only have standard landlord insurance, you are unlikely to be covered in the event of a claim.