Risky business: subletting and insurance
Share accommodation websites are opening up a world of holiday opportunities – but they could also be exposing hosts to a whole world of insurance trouble.
The TV ads make it sound so adventurous and the online sites make it so easy to sign up and reap the rewards; but when it comes to share accommodation sites like Airbnb, signing that host contract as a renter could have serious repercussions.
Before entering into a host arrangement there are many things to consider. There are the tax implications and, importantly, there are insurance issues.
Landlords looking to use these websites for short-term letting should speak to us about making sure the right cover is in place. We can discuss the individual circumstances with the landlord or Property Manager (PM) to determine the best options.
But what happens when a tenant decides to become a host? Of course, the best tenants would discuss their plans with their PM or landlord and then the insurer could be consulted. But more often, the PM and landlord are none the wiser, especially if the tenant just rents out a room.
Renting out a room may see the insurer classify the visitor as a ‘guest’ and therefore the policyholder could be covered for damage and the like.
The real problem, from an insurance perspective, occurs when the tenant effectively sublets the property (that is, they give the guest exclusive use of the home). A landmark case earlier this year shone a light on landlord rights when it came to tenants subletting, but the issue of insurance wasn’t addressed.
A landlord insurance policy is issued based on a number of factors, including the tenancy agreement. Subletting is often excluded as it greatly increases the risk of damage to a property. The question of who is responsible for any damage in a subletting situation is also tricky.
If a tenant sublets the property without the owner’s knowledge, they could expose themselves to financial risk. If a guest causes damage and the landlord’s insurance won’t cover the costs, it would be reasonable for the landlord to seek compensation from the person(s) named on the lease. It’s unlikely that any tenant insurance would cover this kind of liability.
With the festive and holiday season upon us, it might be time for landlords and PMs to give tenants a friendly reminder about the risks of joining the share economy as a host.