Insurer PropertyRisks is warning landlords that their insurance cover could be invalidated by tenants illegally subletting during the London 2012 Olympics.
Nigel Atkinson, head of PropertyRisks, said tenants could easily be tempted into subletting due to the lucrative deals being offered. Sums of £2,500 per week for a one-bedroom flat in Stratford or £6,500 per week for a four-bedroom house in Berkshire are being quoted in advance of the Olympics in August 2012.
“Quite apart from the implications it could have on a tenancy agreement, from an insurance perspective, this form of subletting would be regarded by the insurer as unauthorised and tenants’ contents cover could be voided or prejudiced,” Atkinson said. “The tenant would not only have to carry the cost of any loss or damage to their own property, they would also potentially be responsible for cost of replacement of or repair to landlords’ fixtures and fittings.”
PropertyRisks, a specialist insurer for the residential lettings market, believes that with the sums on offer some tenants may still be tempted to take the risk and will hope to cover themselves with a damage deposit. On one website listing properties to rent, a typical level of damage deposit is £1,000. However, PropertyRisks warns that some of the occupancy levels being suggested considerably increase the possibility of damage – a one-bedroom flat has been advertised as accommodation for four people and a two-bedroom apartment is offered as accommodation for six to eight people. If major items such as carpets had to be replaced, the cost could easily erode the potential profit.
One measure landlords can take against unauthorised rentals is legal expenses and rent guarantee cover, as Nigel Atkinson explained: “If a landlord has this cover in place with us and is unaware that the tenant is subletting, cover will be maintained and the landlord will be protected financially.
“However, we are aware of one report on the rich pickings to be had, that suggests a tenant could do a deal with the landlord and share the profit. Landlords should be aware that if they agree to subletting in this way, their cover could be invalidated. The ultimate risk then is that the sublet tenants decide not to move out at the end of the rental period. Legal costs to re-secure the property may not be covered and the rent might not be paid.”
He added: “Some of the most popular areas for Olympic rentals are places like Docklands and Greenwich where there is a huge volume of rented property. It is inevitable that there will be unauthorised sublets when you are seeing sums like rental plus 70% or more being suggested as the going rate. Our advice is that letting agents alert their landlord clients to the possibility and recommend that they check that they have appropriate legal expenses and rent guarantee cover in place. Importantly, they should also be warning tenants that they could jeopardise their tenancy if they succumb to the temptation to sublet.”
Source : PropertyRisks