Even though there is no general requirement in Spanish law, there are certain specific situations in which taking out home insurance is mandatory or strongly recommended.
In this article, we will answer questions about the legality of letting without insurance, the risks involved in that decision, the benefits of having the right protection and who should be responsible for taking out a policy. We will provide all the information you need to make the best decision for a rental property.
There is no legal obligation in current Spanish legislation that requires landlords to have home insurance to rent out a property. However, there are certain instances in which it is mandatory to have insurance or where it is practically essential.
When there is a mortgage. Spanish legislation establishes a specific obligation for certain situations along with specific coverage requirements. Thus, Article 10 of Royal Decree 716/2009, of 24 April, developing certain aspects of Act 2/1981 on regulating the mortgage market, establishes that assets on which there is a mortgage guarantee must have insurance for damages, covering at least the following items:
Even though there is no generalised legal requirement to do so, many landlords include a clause in the lease that requires insurance for one or both parties. When this clause is included and has been signed by both parties, non-compliance can lead to the termination of the lease as it is a breach of contract.
Even when you can let the property without insurance, the most prudent course of action is to take out insurance that protects the property and to avoid future financial and legal issues.
Letting a property without the proper protection exposes the landlord to multiple risks that can have serious financial consequences:
Having home insurance for a rental property carries multiple advantages that protect the landlord’s investment and provide peace of mind. These can be summarised as follows:
Home insurance covers expenses stemming from a host of accidents or losses, such a fires, floods, breakages, thefts or weather phenomena, safeguarding the owner from having to make unexpected outlays that could be very high.
Civil liability protects the landlord in the event of third-party claims for any damage caused at the property. This is fundamental when there is water damage or other incidents that affect neighbours or third parties.
Most home insurance policies include emergency services such as plumbing, a locksmith, electricity or glazing that are available 24 hours a day, 365 days a year. This is particularly useful in rental properties where the landlord is not always available.
Many policies include legal fees and damage claims, providing legal advice and representation in the event of property-related conflicts in regard to both the tenant and third parties.
Even if the property is empty or partially furnished, you can insure appliances, furniture and other items for theft or damage. This is particularly useful in furnished lets.
Home insurance policies offer great flexibility, making it possible to personalise the coverage according to the property’s specific needs and the landlord’s preferences.
Some policies include coverage for loss of rent, compensating the landlord financially if the property is uninhabitable after a fire and rent cannot be charged while the repairs are being carried out.
It is recommended that the landlord insures the building, namely the fixtures: walls, floors, ceilings, installations such as heating, plumbing and electrics, civil liability stemming from the property and the various risks that can affect the building.
This is the most advisable and usual option, as the landlord has a direct interest in protecting the property itself. Also, as we said before, if there is an existing mortgage on the property, the banking entity will require the landlord to take out appropriate insurance for damages.
The tenant can, and in many cases should, take out their own contents insurance to protect their personal belongings: furniture, appliances, clothing, valuables and other assets that enter the property. This insurance is not required by law, but is highly advisable for their own protection.
Moreover, the tenant’s insurance policy should include civil liability for damages that they themselves cause during their time there, be that down to negligence or because of an accident. For example, if they leave a tap running and it causes water damage to neighbouring flats, their civil liability insurance will cover these claims.
Some leases expressly establish that the tenant must take out their own insurance policy, specifying the minimal coverage required. This clause is perfectly legal and binding once the lease is signed.
In short, the most prudent thing is for both parties to have their own respective policies: the landlord for the building and the tenant for the contents and their own civil liability. This dual protection guarantees full coverage in any eventuality.
What should always be borne in mind is that regardless of who takes out the insurance, be it the landlord or the tenant, the person who holds the interest will be deemed to be the insured party. That is, the owner of the asset damaged by the accident or loss that is covered.
The answer to all your questions
Payment of the home insurance essentially depends on the provision stipulated in the lease signed by both parties. There is no legal obligation that specifically requires one party or the other to assume this expense, so it must be negotiated and reflected in writing.
In general, the landlord is the one who pays for the buildings insurance (the structure of the property), as it is their property and they are responsible for its preservation and maintenance. This insurance protects their investment and covers any structural damage that may result.
The tenant, on the other hand, is usually responsible for insuring the contents if they want to protect their personal belongings, as well as civil liability insurance that protects against any damage caused by their use of the property.
If there is an accident or loss in the rental flat that is not covered with home insurance, the consequences can be serious and costly, for both the landlord and the tenant.
For example, the landlord will need to pay for the repair costs in full, without the financial compensation of an insurer. This can range from hundreds to tens of thousands of euros, depending on the seriousness of the accident or loss. For example, a fire or serious flood can require comprehensive property renovations.