We've answered some of the questions we often get asked by brokers about our Properties cover.
The online questions allow you to enter a percentage for unoccupancy. Our definition of unoccupancy is:
This applies to all premises.
In common with the rest of RSA, it is not within SME eTrade strategy to insure significant numbers of empty premises. Particularly where the unoccupancy is long term, or the building was already empty prior to taking out a policy with us.
We will accept a small amount of unoccupied premises as part of a portfolio of properties on one policy. They must not be in an adverse arson area, and have not suffered any claims relating to unoccupancy in the past.
As part of your duty to make a fair presentation of risk you should carry out a mid-term adjustment (MTA). This should be completed as soon as the premises, or any portion of it, becomes unoccupied. This ensures the correct occupancy details are noted and the correct premium is charged. This is important in the event of a claim.
A grace period is included in a policy (typically 45 days, but may be longer). This is before certain cover events are excluded. Excluded events are; Malicious Damage, Escape of Water, Theft, and Accidental Damage.
The policy wording will also apply to the Security and Inspection conditions after the grace period. This allows the customer time to comply with these important requirements, in order to maintain cover.
The system will generate a referral for this mid-term adjustment. You may be asked to provide additional information such as:
Depending on how the questions are answered, there may be restrictions to the cover.
When adding cover for residential premises, you must tell us:
There is no question in the online journey which allows you to tell us who the tenancy agreement is between.
All tenancies must be arranged directly between the policyholder, or an agent acting on their behalf, and the tenant.
Residential tenancy agreements between the policyholder, or an agent acting on their behalf, and an organisation are not acceptable. Organisations may include a company, local authority or housing association.
Please note: these may or may not be available, depending on which software house you are using.
The use of the residential premises by any of the above must be for residential purposes.
The only acceptable uses are:
Some common scenarios are listed below along with our underwriting approach.
Is this tenant-type acceptable? No.
This is not to be mistaken for bedsits. A bed and breakfast obtains its income from short-term lettings of individual rooms. Income cannot be obtained from long-term property ownership and tenancies.
This tenant type is not acceptable, as it is neither a leasehold, assured shorthold or private residential tenancy.
Some software houses include AirBnB, internet lettings or similar in their list of tenancy types. The letting of an owners' property through these channels is the same as any other form of bed and breakfast. This includes whether breakfast or other meals are provided or not.
If the property owner derives their income from letting their property as a bed and breakfast, this is not suitable for a property owners policy.
Is this tenant-type acceptable? Maybe (see below).
This does not appear in the eTrade list of residential tenancies. However, this does not mean that quote requests cannot be submitted for this form of tenancy.
A bedsit, bedsitter, or bed-sitting room consists of a single room, per tenant, with all tenants sharing a bathroom. Bedsits are included in dwelling types referred to as houses in multiple occupation (HMO).
Bedsits are not to be mistaken for bed and breakfast providers, which are for shorter term lets and include the provision of meals.
Bedsits are generally formed from the subdivision of other dwellings but should not be mistaken for converted flats. A flat is a self-sufficient unit with all facilities, including washing/bathing and cooking, usually in separate rooms. A bedsit will generally not provide washing/bathing facilities within the room, and cooking methods may be limited.
If the tenancy meets the criteria for an acceptable residential tenancy, and all other eligibility criteria such as construction, claims experience and geo risk are acceptable, a quotation can be provided. The quote will be based on the most appropriate tenant type other than bed and breakfast.
A house converted into 3 bedsits with a common bathroom, stairwell, and landings. All tenants have a 6-month AST.
Classify as Private Rental or Residential
A house converted into 3 self-contained flats, all with their own bathroom and kitchen, but common stairwell and landing. All occupants have a tenancy agreement of at least 6 months, and pay rent direct to the owner or their agents.
Classify as Private Rental or Residential
A house converted into 3 self-contained units, containing only a bedroom each, with a common bathroom, stairwell, and landing. All occupants pay a weekly rate that includes breakfast.
Classified as Bed and Breakfast
Is this tenant-type acceptable? No.
A holiday home is a business that obtains its income from the short-term letting of individual rooms, or a whole house or flat. Income cannot be obtained from long-term property ownership or tenancies.
This tenant type is not acceptable, as it is neither a leasehold, assured shorthold or private residential tenancy.
If the property owner gains income from letting their property as a holiday home or similar, this is not suitable for a property owners policy.
Is this tenant-type acceptable? Maybe (see below).
We do accept HMOs. At present, it is not possible for us to record this on the Statement of Fact. We are working with software houses to rectify this.
HMO refers to residential properties where common areas exist and are shared by more than one tenancy within the property. Common areas are any shared areas, such as:
HMOs are not the same as purpose-built blocks of flats. This is because an HMO will have originally been intended for sole occupancy, and was subsequently converted and/or sub divided.
There are differing rights for the various types of HMO tenant. Also, there is differing legislation and licensing that the landlord needs to comply with. This depends on whether they are subject to the Laws of England and Wales, or Scotland, or Northern Ireland. Failure to comply with these will constitute a breach of policy conditions, or give grounds for a claim.
Because of the different tenant types that can be considered as HMO, the specific tenancy and property type should be classified. The various available options will determine the eligibility.
A house converted into 3 bedsits with a common bathroom, stairwell, and landings. All tenants have a 6-month assured shorthold tenancy (AST).
Classify as Private Rental or Residential.
A house converted into 3 self-contained bedrooms. Has a common bathroom, stairwell, and landing. All occupants pay a weekly rate that includes breakfast.
Classified as Bed and Breakfast.
A maisonette converted into 2 self-contained bedrooms. Has a common bathroom, kitchen, living room, access, and gardens. All occupants are students and have a direct tenancy agreement with the landlord for 12 months.
Classify as Student.
An apartment (individual flat) in Scotland with 3 bedsits. Has a shared bathroom, access and living room occupied by persons placed by the local authority. They are the named party to a renewable 12-month tenancy.
Classify as Local Authority.
Is this tenant-type acceptable? Maybe (see below).
Within the United Kingdom, there are 2 main forms of property ownership:
Provided that the leasehold tenancy is for at least 12 months, this form of tenancy is acceptable.
Is this tenant-type acceptable? Maybe (see below).
This should only be used where all other tenant types do not apply. If the tenancy meets the criteria for an acceptable residential tenancy (above), these are acceptable.
Neither of these should be used if the tenant type is more accurately described by one of the other options.
Is this tenant-type acceptable? Maybe (see below).
This does not appear in the eTrade list of residential tenancies. Also, there isn't a consistent approach to whether the question is asked. This does not mean that we should not clarify our approach.
Residential tenancies should be:
Any tenancy arrangement where the policyholder and occupant/s are not directly bound by a lease or tenancy contract constitutes a sub-let. For example, a freeholder of a property sells a leasehold interest to another party. That party then lets that property to a further third party. If the policy is issued in the name of the freeholder and the occupier of the property is tenant of the lessee, then that would constitute a sub-let.
There are some exceptions to the above. If the policyholder is a residents' association, comprising of the owners of the individual flats within that block. Some of those owners may have chosen to let their individual flats out, or a block of flats owned by a management company.
In these situations, we do not deem this to be sub-let. This is because the tenant is under a tenancy contract with the notional owner of that flat, and issuing a policy is a matter of legal convenience.
If the policy is issued in the name of the leaseholder, then we have a direct link between the policyholder and the occupants. We would not deem that to be sub-letting either.
The risks presented by the sub-letting of residential premises are the lack of enforcement of conditions with the tenant in residence. Also, remedies available for damage or eviction between the landlord and sub tenant.
In this scenario, the greatest risk is present where inadequate vetting takes place by the tenant of sub tenants. Alternatively, the use by the tenant to sub-let the premises for social housing with a local authority or other agency. As an insurer, we have no contractual relationship with the tenant in residence, nor the tenant of the landlord. Therefore, we cannot impose terms or make enquiries.
It is in the landlord's interest to ensure that sub-lets are not permitted. If they are permitted by the tenancy or lease, then the tenant must obtain consent from the landlord. Ideally, the landlord can stipulate the nature of sub-letting. Where this is not the case, we would ask you to bring the additional risks to your clients' attention, and suggest that they or their agents consider how best to reduce them.
If some form of control does exist, then there is no action. You may wish to record this and review whether the tenant type submitted represents the tenant or sub tenant.
For all sub-lets, you should draw the Statement of Fact and any requirements relating to residential letting and tenancy types to your clients' attention. Please advise them that we will not usually consider variation from these.
Is this tenant-type acceptable? Yes.
Student tenancies are acceptable subject to the usual eligibility criteria.
Because of the higher claims experience for this tenancy type, restrictions are applied. In addition, the standard cover for unoccupancy is amended to reflect the fact that it is more likely to be empty outside of term times.