Illegal HMOs are being let without insurance cover

Thousands of shared homes could be trading without insurance cover because they are flouting licensing rules.

Property owners and investors have buildings, contents, and liability insurance to protect their investments from claims; including compensation to tenants who suffer injuries.

But many these shared houses (also known as houses in multiple occupation or HMOs) are rented out in breach of council licensing legislation, and failing to comply with the rules generally voids insurance cover in event of a claim.

The latest government figures estimate property owners let about 56,000 shared houses in England (mainly to students) but 23,000 properties break the rules and are unlicensed.

About a third of councils (32%) report they have significant numbers of unlicensed HMOs, and 20% of these council suspect they have more than 100 illegally let properties in their areas.

The small print in most buildings and liability policies generally includes a clause stating that owners should maintain their properties to a good standard and comply with safety rules; like HMO licensing and providing gas and electrical safety certificates.

On average, every other working day, a property owner is prosecuted for letting a shared home without an HMO licence. Recently, a mum and her child died in a fire at an unlicensed shared house in Milton Keynes. A woman was arrested and is awaiting trial.

Insurance companies will ask to see proof of licences in the event of a claim; and will refuse to pay out if a property owner has failed to meet their obligations, even if the policy premiums have been paid in full and on time. Many unlicensed HMO properties are uncovered at this time of year as students return to university and make complaints to the local council’s housing office.

Other councils are trawling through housing benefit records to crosscheck payments to multiple recipients giving addresses that are not listed on the their registers of HMOs.