What is an HMO?
HMO stands for House in Multiple Occupation. This can include bedsits, purpose built and converted flats, and student accommodation.
A household consists of either a single person or members of the same family who live together.
HMOs have become increasingly popular over the past decade, for both landlords and tenants. Landlords are able to get higher yields and higher monthly profits by letting properties by the room. Whilst tenants can get a private bedroom with shared facilities for a convenient all-in-one monthly rent (which can cost a lot less than renting a whole property), and the arrangement might suit students in particular.
Insurance for HMOs
When buying buildings insurance neither traditional residential home insurance nor landlords insurance will suffice. In fact, if you use either of these types of insurance to protect your HMO, the cover may typically be invalid. HMO insurance falls into a specialist category and most Insurers aren’t able to cover HMOs.
Houses in multiple occupancy are considered by insurers to be high risk. By definition, it is a property in multiple occupation, with facilities that are shared by several households, meaning lots of footfall. There are common areas and the use of share facilities, where there may be a greater risk of damage. There is also the unfortunate stigma associated with all HMOs as being converted bedsits, with a faulty kitchen in every bedroom, occupied only by irresponsible tenants.
If you are thinking about buying an HMO or converting your existing buy to let property into an HMO, it is important to remember that you need specialist HMO insurance that recognises the particular risks involved, yet provides you the cover you need.
HOME RENOVATIONS
In a recent survey, it was found that the number of homeowners in the UK choosing to improve their homes rather than move has risen fivefold in the last five years. UK local councils have seen a 29% rise in the number of planning permission requests over the last ten years.
However, whilst the end result of a renovation project can be the home of your dreams, the risk of damage to your home whilst the work is taking place is increased. For example:
• Contractors may be using welding gear and heat lamps which can increase the chance of a fire occurring.
• There may be times when the roof will need to be left open, exposing it to adverse weather such as a storm and subsequent water ingress.
• The property may be left unoccupied for long periods, increasing the risk of vandalism or theft, either of materials and equipment (such as bathroom or kitchen fittings) or your own personal belongings.
• If the property is without heating, there is an increased risk of burst pipes and water damage in freezing conditions.
It is a requirement of all standard home insurance policies that the insurer is notified of building works that you may have planned during the course of the insurance policy, so it can assess the nature of the increased risk. Failure to do so will invalidate your cover as the insurer will include a specific wording within their policy which excludes cover for loss or damage as a result of structural alteration, repair, renovation or any other building work. This may be for any of the aforementioned, or any of the aforementioned above a specified contract value.
It is likely, particularly for larger projects, that the insurer will terminate the policy and alternative cover will need to be arranged. Even if your home insurer does agree to maintain cover for the duration of the building work, it is unlikely to provide full cover, and will often only provide “FLEA” cover only – damage arising from Fire, Lightning, Explosion and Aircraft. It is also likely to include a “Contractors Exclusion” whereby any damage caused by the contractor is excluded.
Renovation and Extension Insurance cover
A specialist Renovation and Extension insurance policy will provide full cover for the existing structure and contract works all under one policy, and will provide full All Risks cover that your household insurer would previously have provided, including Accidental Damage and Subsidence cover, which is likely to be a requirement of your mortgage. In the unfortunate event of a claim, you will only deal with one insurer, and avoid the scenario of various different parties trying to pass the buck and deny who caused what damage, and which insurer is liable for what claim.
