Leading UK Insurance Broker JLT Business Insurance Services examines the risks to you when properties are left unoccupied during the sales process.


The vendor has agreed the price, the buyer has his mortgage in place and everyone is ready to go. Then you realise that the property will actually be empty for several weeks as the buyer cannot move straight away. What is the insurance position for unoccupied properties?


Unless the contract provides otherwise the purchaser will be responsible for the full risk of damage to the property after exchange of contracts while it is unoccupied. In many cases the vendor’s insurance will automatically provide cover for a period after exchange. However this needs to be clarified as the vendor may have cancelled the policy, transferred the cover to his new property or the policy has simply expired. Cover can also be restricted during this period to fire and lightning only.


It’s, therefore, dangerous to rely on the vendors insurance and we would always advise the purchaser to take out unoccupied property insurance cover in their own name from the date of exchange. In many cases we would also suggest the vendor continues with their cover until payment is received as it is often difficult to obtain payment if the vacant property has been badly damaged or destroyed. Understandably many lenders will not be prepared to advance money if their security has been impaired.


The vendor can sue for the money but this is costly as well as being a lengthy process. It may also not be the answer if, at the end of the case, the purchaser does not have the money to pay the claim. Whilst at times Insurers can raise questions of insurable interest, in these cases we find most Insurers will meet any claim for their policyholder and then try to recover their payment from the purchaser later.


A further complication arises if the house is to be left empty for any length of time. The fact that the property is empty is a material fact that must be disclosed to the Insurers otherwise they may have the right to reject any claim. Some Insurers have a condition in their policy defining “empty” or “unoccupied” as when the house has not been lived in for 30 days in a row or does not have enough furniture to be lived in normally. Cover can sometime then be restricted to damage by fire, lightning or explosion or even be terminated totally.


Fortunately there are a number of schemes available that will provide cover for empty properties. Care still needs to be taken with these as many of them still impose restrictions such as requiring the vacant property to be inspected on a regular basis and excluding certain perils such as water damage.


JLT Business Insurance Services operate one such scheme which was designed in conjunction with the Law Society. The unoccupied property policy provides full cover whilst the house is unoccupied subject to an overall excess of just £175, (increased to £1,000 for subsidence claims). Inspections are only normally required where the property is insured for more than £500,000 and cover includes water damage and malicious damage. For the full terms and conditions of the scheme you should refer to the full policy document. A copy of this is available on request from JLT.


Another restriction that some schemes impose is if repairs or alteration work is intended to be carried out. Many Insurers will either restrict the cover or exclude cover altogether in these circumstances. However this is something JLT cater for under our facility.


Properties being auctioned also produce their own problems as the purchaser becomes liable when the hammer comes down and his bid is accepted, and the property has usually been empty for some weeks prior to the auction. JLT have a facility that can provide cover for the property prior to the auction, which can then transfer automatically to the benefit of the purchaser. This leaves the two parties with the simple matter of agreeing any share of the premium rather than try and sort out a much larger problem should the property be damaged or destroyed.


Another restriction that some schemes impose is if repairs or alteration work is intended to be carried out. Many Insurers will either restrict the cover or exclude cover altogether in these circumstances. However this is something JLT cater for under our facility.


To find out more about JLT’s unoccupied property insurance please visit www.jltbis.co.uk or call on 0800 454 371.

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Disclaimer

Whilst all reasonable care has been taken in the preparation of this publication no liability is accepted under any circumstances by Thistle Insurance Services Limited for any loss or damage occurring as a result of reliance on any statement, opinion, or any error or omission contained herein. Any statement or opinion reflects our understanding of current or proposed legislation and regulation that may change without notice. The content of this document should not be regarded as specific advice in relation to the matters addressed.

JLT Business Insurance Services is a division of Thistle Insurance Service Limited who are authorised and regulated by the Financial Services Authority under No. 310419.

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