Is it legal to let a flat without home insurance?
A growing number of landlords are wondering whether it is legal to let a flat without insurance before putting their property on the market. The question mainly arises when landlords seek to reduce their expenses, or when they do not understand the legal obligations associated with letting a property.
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.
Is it mandatory to have home insurance to let a flat?
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:
- Fire damage to the property.
- Other damage: for example, hail or freezing weather.
Clauses in the lease
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.
Prudent recommendation
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.
Risks of letting a property without home insurance
Letting a property without the proper protection exposes the landlord to multiple risks that can have serious financial consequences:
- Third-party liability without insurance
Without a policy that includes liability coverage, the owner must personally assume all damages caused to third parties. - Expenditures in the case of fire
With no insurance to cover damages, any incident, such as a fire, flood or theft, means that the landlord is wholly liable for all repair and replacement costs. - Prolonged loss of income
If the property is seriously damaged with no insurance coverage, it may be inoperative for months while repairs are carried out. During that time, the landlord will lose monthly rental income with no kind of compensation. - No protection against natural disasters
Events such as floods, earthquakes, storms or hail can lead to large-scale damage. However, the landlord will have to cover these expenses in full, which could seriously compromise their financial situation. - No financial recovery
Without insurance, a serious fire can have a significant effect on the property and the landlord’s financial stability, especially if the property makes up a significant portion of the landlord’s assets or income source.
Benefits of having home insurance
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:
- Comprehensive financial protection.
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 coverage included
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. - Peace of mind for all parties
Both the landlord and the tenant have that security that in the event of certain unforeseen circumstances, there is an insurance company that will take responsibility for the necessary repairs. - 24-hour customer service
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. - Legal protection
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. - Flexible contents coverage
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. - Personalised coverage
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. - Compensation for loss of rent
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.
Who should take out home insurance in a rental flat?
The landlord’s responsibility
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’s responsibility
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.