Serviced Accommodation: Higher ROI for UK Landlords?
We spoke to Steve Cox, Business Account Manager at Alan Boswell Insurance Brokers Ltd, to find out more about the growing trend of serviced accommodation. With more and more landlords attracted by higher ROI, opting to rent out their properties on websites such as Airbnb, it’s vital they have the right measures in place to protect their property and the guests renting it.
What is serviced accommodation?
Serviced accommodation is fully furnished accommodation available for both short-term and long-term stays. It provides additional amenities to those expected from traditional rental accommodation and more space than in equivalent hotel rooms.
How does it differ to other types of buy-to-let investments?
Standard buy-to-let properties are usually rented on a minimum six-month tenancy agreement. That means both the landlord and tenant have the security of knowing the property will be occupied, and that rent will be paid, for a fixed period of time. Serviced accommodation doesn’t tend to have these agreements in place.
Why has serviced accommodation grown in popularity with landlords over recent years?
Predominantly because there is an opportunity to generate increased income – although it does mean there is additional work and costs involved for cleaning and maintaining the property. Plus, serviced accommodation and holiday lets will not be affected by the new Section 24 tax laws, which are due to come into effect later this year.
What do landlords need to consider when thinking about insuring serviced accommodation?
There are various types of insurance to consider when letting out serviced accommodation. In general, as a minimum we would suggest taking out cover for buildings, contents, public liability, employers’ liability and business interruption. It’s vital that you tell your insurance company that you’re using your property as serviced accommodation, because some insurers will not cover this type of risk.
What are the cost implications of this?
Owing to the nature of the risks, insurance for serviced accommodation tends to cost more than a standard buy-to-let quote.
What would a typical yearly policy cost to cover serviced accommodation?
It’s impossible to give a typical cost as there are so many variables to take into account (e.g. location, construction of building, sums insured required, claims history). However, as an independent insurance broker, we can help landlords find the cover they need at a competitive price.
Is it a legal obligation for the landlord to insure the property or is it the tenant’s responsibility?
It’s not compulsory for a landlord to insure a building, but it would be risky not to do so because you would have to find a way to pay for any damage. Also, the tenant is not allowed to insure the building, because they don’t generally have an insurable interest in the property.
What are the consequences if landlords don’t insure the property properly?
If it’s not insured correctly then the landlord could lose out financially. If the property burns down or is flooded and the property isn’t insured, then the landlord would have to find means to repair or rebuild the property.
We’ve seen public liability claims rise recently too, where a tenant or guest has injured themselves at the insured property and is looking to claim for damages from the landlord. The cost of this can potentially run into millions, so it is strongly recommended that you check you have public liability cover in place if you’re considering serviced accommodation.
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