Taking in a lodger may invalidate your insurance

Note - the Landlord Law Blog has now moved to www.landlordlawblog.co.uk.

See also my new website The Lodger Landlord.

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This is the subject of an excellent (if worrying) article in today's Observer. Were you aware that failing to make proper enquiries, or taking in students (which some insurers find particularly objectionable "because the lifestyle of students - bringing friends home and perhaps leaving doors unlocked - poses a greater risk" according to the Bank of Scotland), can leave you without cover?

"We cannot provide home insurance to lodgers or paying guests because you [the policyholder] are giving access and responsibility for the security of your house to someone you do not know," said a spokeswoman for esure, "If a policyholder takes in a lodger without telling us, their home insurance is potentially null and void because withholding this information counts as non-disclosure."

Other insurers say the same. For example the Bank of Scotland: "If a policyholder did so [rent out a room] without informing us, this could invalidate the cover". Even if you are covered, an insurer is likely to refuse to pay out against losses from burglary, if there is no evidence of forced entry.

So what should you do? Here are some suggestions:

Tell your insurers
This is probably the most important thing. If you can show that your insurers were told, preferably in writing, that you were going to take in a lodger, and they did not warn you that your policy was at risk, you will have a good chance of successfully challenging any non payment of claims on that basis. Make sure you contact your insurers in good time, so that if they say that you will no longer be covered, you have time to find another insurer before the lodger moves in.

Carry out checks against your lodger
You should of course be doing this anyway. You need to take references and consider also getting a credit check done (there are many companies online which will do this - you will find some listed here). Make sure you double check that referees actually exist, and that the telephone number given is not that of a friend of the prospective lodger! For example employers details can be verified by looking in the telephone directory or online.

Get your lodger to sign a letter confirming they have no unspent criminal convictions
Many landlords will find it very embarrassing to question potential lodgers (who they may then be sharing a home with) about this. Probably the best thing to do is just give them a form to sign, saying that it is a requirement of the insurers. Of course if the insurers themselves produced a form for landlords to use, this would make things easier.

It seems from the Observer article that insurers will expect landlords to question lodgers about unspent convictions. Zurich told them: "We do want a homeowner to ask tenants about criminal convictions because you have to declare, at inception or renewal of a policy, if anyone in the property has a conviction. We could decline a claim and void a policy because of non-disclosure. If the lodger lied to the homeowner we would look at it on a case-by-case basis. If the policyholder can prove they have a process including written confirmation, this is as much as they can do."

Find another insurance company if necessary
If your current insurer is proving difficult, this does not mean that you will be unable to find cover. For example companies which specialise in landlord insurance may be able to assist. If your lodger admits to a past conviction, but you still want to let a room to him, the charity Unlock (the National Association of Reformed Offenders) may be able to help you find an insurance company prepared to offer cover.

In conclusion
It is very important to be aware of this problem and to deal with it when taking in a lodger, Otherwise you may be in a position of suffering losses but without being able to make any claim against your insurer.

(NB All quotations are taken from the Observer article)