Property-a-holics

LL insurance or in the case of flats the block insurer refuses to pay for a claim because you didn't have all the tenant details etc

So imagine the worst case scenario of say a fire

Could you afford to restore  the property  if made uninhabitable and the insurer refused to pay out.

It has happened to me.

Fortunately  I presumed the insurer wouldn't pay out so I  got on with it and restored it myself

Took a couple of months but at least it just took some heavy cleaning and a repaint.

2 months later property is let again

2 months after that insurer refuses claim!!

So remember some insurance is as much use as a chocolate  teapot!

Same here.  Took 12 months to sort and cost me £120k.  Didn't see that one coming, but it made me - capable of building a house from scratch and a better landlord so not all bad with hindsight.

Hi

just wondering why the insurance didn't pay out that's a nightmare, I have always got electrical certs even though it's not a requirement  on all property's as they last 5 years cost a fortune to get as I found most fuse boxes weren't up to scratch and my electrician said your insurance is void if the fire is electrical fault and you don't have a cert cost about 2300 for all 5 properties so is a lot but I surprise its worth it and some are up  due to be done again in 2 years.

It was complicated.  It was treated as malicious damage as the tenants had bypassed the electric meter in order to set up a cannabis factory on quite an industrial scale and basically I hadn't been inspecting properly. You learn by your mistakes.  The £120k did go beyond repairing and created a house beyond what I would have ever thought of if the fire hadn't given me a blank canvas though.

Omg that's is awfull glad you got it all sorted , but that is scary I would be stressed to the max.

how do you now prove you have been round to check on the house as I never record when I've been I need to do you take pictures of all the house every time you visit how many months for insurance should you visit and how do you record it  I wouldn't have the money to do that scary I feel sick

I can't advise on best procedures.  I just have an email record that I am going around now and I am far more on the ball with all of my tenants' lives as they literally are my business. All I know is it is hopefully unlikely to happen to me again.  I am prepared to put my hands up to my mistakes.  I didn't vet my tenants properly and it was clear from the 6 skip loads of finished peat based compost that they had put under the floors that they been growing weed for a long time.  I didn't even trust my own sixth sense that something wasn't quite right at the start because I was so pleased to have found a tenant who seemed keen to move in and pay.

With hindsight there were some tell tale signs that things weren't right.

1) When the gas safety checks were carried out, the tenants could never agree to the day I suggested and always requested that it would be a week later. I always did my best to accommodate this although I remember it being a pain because I used to get a good deal by having loads done in one day. My guess is this gave time to clear the bits of the house that I would see and was probably a necessary but annoying part of their operation which included many rented houses (I found a rota for various address in the wreckage). 

A couple of months before the fire I had been around with a gas safety man.  We were asked to take our shoes off (I was delighted) and the lady was very respectful and also offered us tea and cake.  I glanced around a little of the downstairs which seemed perfect and then said that I should probably have a look upstairs as I hadn't been there for ages.  She said I could but that her mother was asleep upstairs as she wasn't very well. She would need to go up, wake her and check on her first.   I said not to worry, I wouldn't intrude as the downstairs looked fine.  The police told me that this could well have been a lucky escape for us as there may well have been people waiting for us if the house had been full of plants.

2) In 3 years, nothing ever went wrong with the property.  Now this is the dream, but unlikely to occur in a large Victorian house.  It turned out that slates had slipped on the roof and a fence had blown over and the neighbour had asked for my details only to be told not to worry as the tenants would sort it.  Apparently they promptly did and I was none the wiser.  The neighbours now have my number and I have got to know them.

3) Rent  - it wasn't cash directly to me as was orignally suggested, but they always paid in cash into my bank account in the High Street so the money wasn't traceable and they may as well have been giving me cash.  It was only after the event that I realised the real significance on my bank statement and now I always question anyone not paying by standing order as per the contract.

4) The actual tenants - I agreed to let to a lady from Hong Kong who was going to be working with her husband in a college in London.  Her Mother would also be moving in slightly later.  TI dealt entirely with her.  The college gave a reference but as it turned out didn't actually exist!  On move in day the same lady turned up with a "girl" in her early 20s clad head to toe in skin tight leather who spoke no English.  She also seemed to be moving in, but in no way did she fit with the tenancy if you know what I mean.  I remember the girl because I had 2 lads working for me and I had to tell them off for going on and on about how attractive she was and how they would come back and work for free if she needed anything!  I should have asked questions but all I cared about at the time was ensuring my new tenant was happy with everything.  Now I insist on meeting everyone who is moving in to a house and actually invite families to tea at mine first to sign up etc and really get to know them. My children also feedback on what they thought of tenants' children. I find genuine people really like this.

5) The tenants were Chinese.  Make of that what you will, but the very first question the police asked me was "Were they Chinese?"  Apparently our area had experienced a problem with a Chinese gang doing this although it would have been nice to have known this.

If I could go back in time I would give myself a slap, but I was so naive that I had never even heard about cannabis being grown in houses, until the day of the fire.  Since those days I spend a lot of my time trying to be aware of all the rules and doing things right.  I am far more proactive.  I used to think that no news was good news as far as my properties were concerned.  I no longer think about it that way.

Don't think you should beat yourself up so much over the problem you suffered.

I have noted that my block insurance now as a clause relating to the issues you faced.

It does seem that LL need to engage in more ongoing DD if they ever hope to claim on insurance in the event of circumstances such as yours.

LL should ask at insurance renewal if any special conditions pertain for ensuring a claim would be successful in the event of issues you have experienced.

I believe that such clauses require more prescriptive DD and a formal way of recording such inspections etc.

So perhaps a signed record along with a mobile photo of the tenant and the signed sheet.

Any tenant that would be resistant to their photo being taken would give cause for concern.

Conversely the tenant might wish to take a photo of the LL with the record sheet which no normal LL would object to.

LL need to comply with more onerous requirements insurers are now insisting upon.

This can only be due to the increasing costs caused by circumstances from criminal activity.

Fire damage is now very rare.

Flooding costs insurers far more.

But it seems there have been more fires than would normally be the case due to criminal activity

LL will just have to comply with what insurers require so that any claim would be successful.

Vanessa that is a brilliant list the only things I would add are as follows:

Anti social behaviour on the part of your tenants. This can lead to loss of tenants in an HMO or problems with authorities, neighbours and so on.

The one additional thing people never consider but can be extremely damaging is their own circumstances such as:

Lack of personal liquidity, struggling to pay their own liabilities such as personal loans, mortgages, demands created by the B2Ls themselves, losing their jobs, if they have them, illnesses, family dramas and crisis's. All of these things affect the ability of you to effectively and efficiently manage the business which in turn costs money and impacts the overall bottom line.

I have run many businesses over the last 30 years and it is fair to say you cannot plan for every risk but you do have to accept there are risks and you also have to try and mitigate the ones you can come up with.

We have just been accredited for ISO9001 and ISO27001 standards, to say that the majority of the work we carried out was one giant risk assessment was an understatement. But one thing it brought into focus for me is you will never negate risk altogether within any business but ignorance to risk is risk in itself.

Finally I would say try hard not to create risk unnecessary don't over extend, buy properties that work for your skill set and location. Whilst it can be attractive to buy a high rental yield property in the North East if you live in the South West you are essentially creating a risk when something happens and you are far from site to deal with it. Over leveraging has been an issue for decades but has only really focused in peoples minds due to S24, if LL's had kept an eye on how leveraged they were in the last 10 years or so there would not be as many looking fragile in the wake of S24 today.

This post can probably put many off starting in B2L at all, if that's the case then it may be for the right reasons but if it makes one LL think before rushing into a deal it is worth it in the long run trust me.

Thanks for those great additions Chris.

Risk is something we should talk more about in property!   Education is a very good strategy for mitigating/reducing risk.  If you know what the potential pitfalls are, you can endeavour to avoid them.  Being a landlord has business risk associated with it. Things do not always run smoothly.  Prevention is ALWAYS less expensive and less heartache than CURE.

Some related topics:

Is "Risk" a four letter word in property? 

Risks, omissions, and worst case scenarios

Guide on protecting property at risk of flood 

Low risk strategy to get started in BTL 

Towns and cities at risk of housing "bubble" 

Risks to landlords revealed by Paul Shamplina

Risk appetite

Comment on @property118 blog "I would rather my property be empty than risk taking on a LHA claimant"

You're right and being a landlord for a lot of people is different than most other businesses as it is commonly run as a sideline to something else such as employment or other business.

Because of this apparent lack of formality people tend to operate more by the seat of their pants as it doesn't appear to be that important. It is for this reason we have so many poorly educated landlords (I mean in the ways of being a landlord such as regulations etc.) ill equipped to be truly successful and so vulnerable, as we have seen, to market forces.