Insuranace for Loss of Rental Income
Please help in making it possible to obtain Insurance for Loss of Rental Income on Leaseholder premises.
In summary - Loss of rent insurance is easily available to Landlords for their Freehold properties. It is not available to them for their leasehold properties. There is one exception to this – cover may be obtained for the loss of rent attributable to the contents of Leasehold properties but not to the Buildings part (thus over 95% of the rental income is not covered).
This is an Industry wide practice. I am astonished that Mortgage providers have not worked to get this anomaly corrected.
Re:- Building Insurance on Leasehold properties
I write to ask you to campaign to change the way Insurance policies are written concerning Building Insurance on Leasehold properties.
There is a serious defect in those policies that provide cover for Landlords of Leasehold properties as distinct from Freehold properties.
Landlords need cover against Loss of Rental Income in the event of disaster to the building. This is readily available on Freehold properties but is not available for Leasehold properties. Please see the details below:-
Standard Landlord policies provide for loss of Rental Income as well as reasonable alternative accommodation in the event of the Building becoming uninhabitable for long periods of time, but this is only available to them on their Freehold properties.
Leaseholders are in a totally different position. The Building Insurance cover provides only for Alternative accommodation (usually limited to 36 months) and not for loss of Rental Income for Landlord Leaseholders. The cost of the premiums is about the same as for Freehold policies despite less cover being offered.
For most Resident Leaseholders this is not a problem. For Landlords this is a huge problem as their tenants are likely to end the tenancy quickly so leaving the Landlord with no income until the property is rebuilt or put right. They would therefore receive no Insurance payments to mitigate their loss of Income during which time the Resident Leaseholders are receiving full Insurance cover in the form of Alternative Accommodation. Typically this period is limited to 3 years. Landlord leaseholders are therefore at a significant disadvantage compared to the Resident leaseholders and are discriminated against. They run the same risks as the Resident leaseholders and pay the same premium but are unable to claim the same value of benefits from the policy.
It is not possible to buy protection for Loss of rental Income as a separate policy.
Apparently most Building Insurance on blocks of leasehold flats does protect loss of Rental income too, but only for the named Policy holder – the Freeholder. The cover does not include the Leaseholder.
The solution is either for the Leaseholder to get his/her name added the Policy schedule. This is not very practical as Freeholders have to give their permission. Administratively this would be totally impractical for them and the Insurance company if all Landlords requested this.
Alternatively there needs to be an Industry wide change of practice so that these policies are amended and are worded such that Insurance company writes into the policy schedule that cover applies to the Freeholder (e.g. ABC Limited) and all respective Leaseholders and their rights and interests.
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