After experiencing a “significant rise” in claims related to criminal damage to rental properties, Norwich Union has taken the unusual step of preparing a leaflet for landlord policyholders, urging them to be vigilant.
In particular, residential landlords are being told to be alert for signs that tenants have converted their properties into cannabis farms, as insurers report a big rise in claims for damage inflicted by the illegal activity.
“We want to help property owners become aware of the risks and provide some advice on the best way to protect their investments,” says Norwich Union.
“It is a requirement in all insurance policies that you must take all reasonable steps to prevent anything happening that may result in a claim. If it becomes apparent that this has not happened, then a claim may be refused.”
Organised gangs, rather than individuals, are said to be behind the rise in cases of cannabis farms, which can sprout up in homes in respectable suburban and rural areas.
The gangs are thought to secure tenancies by providing false identification or references, and paying in cash.
Major damage to properties is inflicted as criminals tamper with electrical wiring, creating a fire risk, set up irrigation systems and demolish internal structures to make room for their crops.
“Damage claims are large for these cases with £10,000 to £50,000 fairly typical,” says Robert Graver, director with Alan Boswell, which specialises in insurance for landlords.
“In extreme cases all the internal walls of a home were knocked down to make space for the plants. Homes can be trashed.”
One of the largest damage claims recently settled was for £40,000. In this case, the owners had rented out their home while going to work overseas for several years.
Although this claim was settled, landlords are being urged to check the small print of their cover to ensure they are covered for criminal and malicious damage, as these are not standard features.
“Not all damage inflicted on the property results in a claim being made, as several of the budget-type landlords’ insurance policies specifically exclude cover for malicious damage by a tenant,” warns Steve Bradley of UKinsurancenet.
“This can be devastating as a lot of landlords have also got mortgages on these properties and to get the property back into condition is beyond most people.”
But landlords also need to be aware that there is also a requirement for them to take “reasonable precautions” to protect their investment. This means properly vetting the tenant and carrying out background checks.
Landlords are also advised not to accept cash payment and instead insist on direct debits. Regular inspections of the property should also be undertaken, both externally and internally.
“Landlords who ignore the warning signs and don’t take precautions are less likely to get a sympathetic hearing from their insurer,” says Graver.
“You can’t guard against this situation completely but you can take steps to minimise the potential of it happening.”
