Buy to let insurance cover is set to rise for thousands of property investors as the government plans to exclude rented homes from the flood insurance subsidy fund.
Flood Re is due to start later this year and offers affordable insurance to homes in flood risk areas.
All home insurance customers will pay a £10 levy on their policies that will go into the fund claims from homeowners hit by flooding.
In exchange for the subsidy, insurance firms will agree to offer affordable cover to homeowners.
But unlike the ‘statement of principles’ between insurers and the government that Flood Re replaces, the new cover will not include businesses – including rented homes.
Insurance costs for landlords and businesses are expected to rise when the scheme starts.
Hundreds of thousands of homes nationwide are likely to come under Flood Re – and a large number of homes rented out by private landlords and social housing organisations will be left out of the safety net.
According to official figures, around a third of all homes are owned by private landlords and local authorities, adding up to around 8 million properties.
According to figures from the Residential Landlords Association, between 50,000 and 100,000 rental properties are in flood risk zones. Around 400,000 private homes are also in the zones and are likely to come under Flood Re.
The buy to let loophole in Flood Re...
is under discussion between the Council of Mortgage Lenders (CML), the trade body for banks and building societies lending to landlords, insurers and the government.
CML director-general Paul Smee said: “We find it difficult to believe that the original policy intention was to exclude a whole swath of residential property from the stated aim of ensuring that affordable flood insurance continued to be available across the market.”
The Association of British Insurers commented that they had no evidence commercial properties would have problems finding flood insurance cover despite Flood Re.
The Environment Agency publishes a map showing areas at risk from flooding.©LandlordZONE® – legal content applies primarily to England and is not a definitive statement of the law; always seek professional advice. Legislation changes, so check dates on these articles. If you have questions go to the LandlordZONE® Forums