Houses that are empty are not homes. They are a problem.
Brian Dunk, Managing Director of Straight Solutions, warns of the risks to estates when a property is left empty.
Unoccupied properties come in all shapes and sizes. The only common denominator is that they are invariably valuable family assets that need to be properly protected. All the while a property remains empty it’s much more vulnerable to loss or damage with extra risks such as arson, malicious damage, attempted theft or weather damage often making them more difficult and expensive to insure.
In practical terms, the first question facing solicitors dealing with insurance for unoccupied houses is whether the estate has the necessary funds to pay the premium.
If the estate has funds that can be accessed easily there is the option of buying insurance for an appropriate period of time. Generally, when the premium is paid ‘up front’ you can usually obtain cheaper basic premiums. However, annual or 6-monthly ‘short-term’ policies are subject to cancellation charges that are heavily loaded at the front end. This sometimes means a full year’s premium is charged for the equivalent of just three or four months’ cover.
Risks of ‘short term’ policies
In recent years many practitioners have been taken down the route of funding a series of three or 6-month policies with premiums paid up front. This option has several risks for the firm:
- Paying too much for cover
- Omitting to renew the cover
The latter risk is much more dangerous: we know of several professional indemnity claims costing over £100,000 where an uninsured fire has occurred in an empty house where the legal team had failed to renew cover. The best way we know to avoid the risk of gaps in cover or omission is a particular policy only available to solicitors called ‘Watchman’. It offers wide standard household insurance cover at a simple daily rate, with most of the premium deferred until the property is sold or for up to a year later, assisting the firm’s cash flow. A small deposit is paid at the outset and the final premium is charged according to the number of days on cover.
Beware cheap policies
They also mean stricter terms and conditions. Our experience shows that insurers do not put clauses into their policies unless they intend to use them. For example, many such policies have a seven day recorded inspection clause and in the small print “every room must be inspected”. Contrast that with Watchman insurance policies where only a 30 day inspection is required and any build up of waste and mail is removed.
Security clauses
Unoccupied property insurance can attract punitive levels of insurance premiums and sneaky policy conditions that can be difficult to comply with. Virtually all house insurance policies have some form of security warranty requiring that the house has locks that are to a minimum requirement of ‘5 lever MDL’. A more realistic security stipulation requires that all of the locks be left in the locked position and for the keys to be removed from the premises, which is much easier to comply with.
Other factors
Other issues that affect the cost and availability of insurance are the age and type of building, whether it is Listed, its construction, the future plans for the property and the sum insured or limit of liability.
Rebuilding costs should not be confused with market values, since they are driven by different factors. Two examples illustrate the point:
- Single bedroom bungalow on the banks of the Thames with 1 acre garden: rebuilding cost £75,000, market value £650,000
- Listed stone cottage, 3 bedrooms in a remote village in Wales: rebuilding cost £250,000, market value £75,000
We always advise that an unoccupied property policy should include Property Owners Legal Liability cover as this will indemnify the estate for liability arising from injury claims from visitors.
For more advice and to contact us about unoccupied property insurance please call 01935 389812 or email enquiries@straightsolutions.co.uk.