What makes a House in Multiple Occupation (HMO) different to most other types of let accommodation is the fact that certain basic facilities are shared between tenants who are not related to each other in any way – facilities such as kitchens, toilets and bathrooms.
In an attempt to control the standards of accommodation provided when facilities are shared in common, local authorities reserve the right to allow premises to be used as HMOs only if they are licensed. In any event, any “large” HMO – that is, the building is 3 or more storeys high, it is let to 5 or more people who comprise more than one household, and the tenants share a toilet, bathroom or kitchen.
The standard of accommodation offered in an HMO means that rents are typically lower than in other types of let property – and this, in turn, attracts those on lower incomes, such as students, the unemployed, or those on welfare benefits.
If you are the landlord of an HMO, you may find it more difficult than usual to arrange the insurance you need to safeguard both your investment in the bricks and mortar or the property and the buy to let business itself.
Many regular insurers, for instance, might refuse cover when the tenants are drawn from such groups as students, the unemployed or benefits claimants.
Specialist HMO insurance, on the other hand, is specifically designed for landlords of HMOs. The expertise and experience of a specialist provider may be used to find cover that includes all categories of tenant – so you may be sure to maximise the potential of this often lucrative market.
So, what does HMO insurance cover?
Building and contents
- just like most other types of property insurance, at the heart of HMO insurance is protection of the structure and fabric of the building itself, together with any contents owned by the landlord;
- the latter might be limited to furniture, furnishings and utensils in the shared areas such as the bathroom and kitchen, for example;
- the risks covered included such potentially serious threats as fire, storm damage, flooding, impacts, escape of water, theft and vandalism – and it is usual for the total building sum insured to anticipate a worst-case scenario in which the entire building is destroyed and needs to be completely rebuilt;
Landlord liability insurance
- HMO insurance typically incorporates the landlord liability insurance you need as indemnity against claims which might be made by your tenants, their visitors, members of the public, or neighbours who suffer an injury or have their property damaged after some contact with your premises;
- claims of this nature may involve substantial sums – especially if physical injuries are concerned – so, landlord liability insurance typically provides cover of at least £1 million;
Compensation for loss of rental income
- your HMO is a business from which you rely on the rents collected for your income;
- in the event of a serious insured incident, however, the HMO may become temporarily uninhabitable, and you lose the rent that might otherwise have been collected;
- HMO insurance, therefore, typically makes provision for compensation of that lost rental income – up to prescribed maxima, often related to a percentage of the total sum insured.
If you are the landlord of a building in which several tenants live as separate households and share essential facilities such as toilets, bathrooms and kitchens, you are likely to need specialist HMO insurance.