No Consent to let - wiil LL insurance payout?

bobby_davro_2

Hi all,
My friend from work is about to let out his house as he about to move and purchase another property down south.
Although i have advised otherwise, unfortunately it seems he is going to rent out the property without telling his mortgage company as he can't afford the fees that go along with it.
Moral issues aside, i would be more concerned about his house insurance? He is switching to Landlord insurance but would that still pay out if there is no CTL - For example, if a fire broke out, will the insurance be void? Does anyone have actual evideince or case studies on the web where this has actually occured?

My advice to him was to just sell up, but he is in Negative equity, so reluctant to take a hit and he seems to think half the landlords out there don't have CTL anyhow!
Is this true, and if so, is the insurance void for all of these people or are there certain LL insurers who don't require CTL proof?

Thanks

bigblackdog

i wouldnt have thought it matters regarding insurance , what has it got to do with it wether you have consent from your mortgage lender ? i thought the consent is more to protect the tenant from being thrown out if the house gets re possesed . Unless of course the insurance provider specifically asks , and you then go on to lie about it .

theartfullodger

What else is your "friend " planning on not bothering with ..- gas safety certificate, safe electrics, protecting deposit, understanding Landlord&Tenant law, using watertight paperwork, declaring tax,

tbs624

bobby_davro wrote: »

... it seems he is going to rent out the property without telling his mortgage company as he can't afford the fees that go along with it.......... he is in Negative equity, so reluctant to take a hit and he seems to think half the landlords out there don't have CTL anyhow!

So how is he going to fare when there are repairs to be done on the property?

Does he have a contingency fund for when his T pays late/ stops paying altogether?

Best of all, how would he deal with the Lender foreclosing on the mortgage and his subseqent inability to get another mortgage product? Lenders tend to prefer those who abide by the Ts and Cs of their residential mortgage: renting out without a Lender's consent is a clear breach of those terms.

He's obliged to report his rental income to HMRC.

Perhaps he'd like to have a look at this...http://forums.moneysavingexpert.com/showpost.php?p=39866624&postcount=10

theartfullodger

As TBS says...

Indeed, (Apologies for stating this yet again..) ONLY start renting out property if you have the emotional & financial reserves to cope with the "Tenant from Hell" who doesn't pay for (say) 7 months, you keep having to pay the mortgage & legal fees to get him & AND repairs he keeps ringing up about: What, not going do repairs for the cheapskate cheating tenant??? Then Judge at eviction hearing will allow him to stay longer as the evil profiteerng Landlord is harassing tenant...

Sounds like your "friend" does not have the financial reserves ...


Cheers!

Artful...

SouthCoast

No Consent to let - wiil LL insurance payout?

No.

Non disclosure of a material fact.

Term: uberrimae fidei
1.
This term describes a class of contracts whereby one party has a duty to disclose material facts relevant to the subject matter of the contract to the other party. The is term applied in insurance contracts such that the insured legal person must disclose any relevant particular that may affect the insurer's decision to grant the insured a policy of insurance. In the event that a relevant disclosure does not take place, the contract is voidable at the option of the insurer
The duty may also apply to contracts for the sale of shares, land, and partnership.
The terms is also used in the context of fiduciary duties.
[Latin: of the utmost good faith].

theartfullodger

Kinda obvious really.. if you cheat & lie why would you expect the other party to stick to the agreement??

robcauson

Landlord insurance will be based on the assumption that you have the legal right to let the property, and acceptance of the contract of insurance will include disclosure of material facts. Not having consent to let may not be specifically uncovered through the questions asked, but it would still be considered a material fact and non-disclosure could lead to the policy being invalid and claims being declined.

I won't go into the moral issues since you've asked us not to, but that point alone should be enough to make your friend think. As with most things, avoiding a fee at the beginning could put your friend in a position where costs later on escalate far beyond the money saved in the first place, so the best and only viable course of action should be to obtain consent to let from the mortgage provider and have valid and relevant insurance in place.

Cheers
Rob

bigblackdog

SouthCoast wrote: »

No.

Non disclosure of a material fact.

if he buys 'landlords insurance' he is disclosing the biggest material fact , that he is a landlord ,if he was not getting landlords insurance it would be different

baxxy

Hi Bobby, i think this was covered recently here... looks like as long as you have landlords insurance it should pay out whether you have full consent or not.... also, i'm sure if there were cases where the insurance hadn't paid out without CTL, someone here would have already pointed it out....

new_home_owner wrote: »

Quote:
Originally Posted by phlash
The problem with your whole theory is that you believe the only risk is being repossesed.......very short sighted. You still fail to address the insurance point, now made for the SIXTH time. (I have 4 more pages to catch up on, I doubt I've heard the last from you!)

The insurance point is straightforward, though some on here like to scaremonger.

Leasehold properties (generally flats and some maisonettes)
(There is confusion between owners of flats who are technically tenants of the freeholder on long leases, so I've used freeholder, leaseholder and tenant terms - the leaseholder being thought of as the owner usually on a 99 or even 999 year lease and tenant being the short term tenant on an AST)


Building insurance is provided by the freeholder and usually paid through the service charge. The freeholder would need to consent to the property being tenanted so that they can inform and get agreement from insurers. This should be written into the lease.

Contents insurance is down to the individual leaseholder. A leaseholder intending to let the property will need to have contents insurance that allows for tenants. If they didn't, they would be liable for damage that could be attributed to the tenant; this is because insurers deem that people are more responsible with their own property than with others and so the risk is greater.

Without the correct insurance an insurer would not pay out for anything that could be attributed to the tenant, but would pay out for things that are not connected to the property being tenanted. With the correct insurance, the insurer would only be insuring the leaseholders property and the parts of the building they are responsible for (sanitary ware for example). Tenants should be advised to take their own insurance for their contents and landlord's property that they are responsible for.

Freehold property (usually houses)

The building and contents insurance is down to the owner. If you let the property you need insurance that covers the property being tenanted. You would then be covered for damage that could be attributed to the property being tenanted (including legal liability to the tenant). Without the correct insurance you would be covered for things that have no connection to the property being tenanted eg subsidence, but you could have claims reduced if you didn't notify or deal with problems in a timely manner because you weren't at the property. eg if you lived in a property you would be expected to notice movement in a wall, a tenant may not notify you of this and if you insured as owner occupier the insurer may suggest that the remedial work costs more because the problem had been allowed to worsen. Without the correct insurance you would have no cover if the tenant was injured in an accident caused by something in the property. Landlord insurance would cover this. Also if the tenant wrecked the place, without landlord insurance you would face the cost of repair yourself.








So basically if your house/flat is leasehold you would have to check the leaseholders insurance, but if its freehold its down to the owner to make sure they have got the right insurance?

so all the scaremongering from thrugmuler,phlash and VIGILANT waffling on about not being insured would probably not be the case 9 times out 10 if the mortgage owner makes sure they are covered, whether they have consent to let or not.

cheers silvercar

G_M

I've never come across an actual claim in this position, which is the only real way of testing whether an insurer would consider this a material fact. My instinct is to say the insurer would need to know the property was rented, but not whether a lender had granted consent to let - this latter would not affect the risk so far as I can see... though it might.

However, most mortgage lenders insist a property is insured, and insist on being named on the insurance as an interested party. If they are not, they will soon be enquiring why the property is not insured. If they ARE listed as an interested party, they'll be sent details of the insurance by the insurerer, and will then start asking why the policy is a landlord's policy!