Landlord insurance in jeopardy

Question from Matthew updated on 21st December 2015:

While investigating possible causes of waste water blockages, I discovered that my tenants have two to three companies using the property as a physical business address.

My insurance covers a home office of 50% maximum. However, this is not home office activity. They are investment and development companies and have boards of directors who do not live at the address.

The lease has no maximum figure number but it does have a clause that says no subletting.

How do I find out how much they claim in rent against their tax and am I entitled to what they have charged these companies for rent?

Further, I am concerned that this activity means that my residential house is uninsured. I am also concerned there is some kind of tax fraud going on as there is only an office in the lounge. Finally, as the businesses were active before my tenants signed a residential lease, was it fraud for them to not disclose this information?

What would you do?

Our expert Myles Noble responded:

From an insurance point of view, the tenants are potentially jeopardizing the landlords insurance cover as the usage is not for private residential purposes. Now that you are aware of this you need to take action ASAP. As it a material fact, you should probably tell your insurer. The insurer may well continue cover albeit with revised terms.

Since the tenants are breaching their Tenancy Agreement, there are certain steps you will need to take. My recommendation would be for you to contact Tenancy Services and find out what the correct course of action is in this situation. It is likely that you will have to give your tenants a "notice to remedy" the breach.

Myles Noble is head of claims and earthquake response for Crombie Lockwood. He also holds various advisory board positions in the insurance industry.

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