Increasing unemployment and the continuing economic downturn may leave buy-to-let investors with a greater exposure to risk, writes Rachel Williams.
According to the Office of National Statistics, unemployment has risen to 951,100 ‘ the largest increase since the autumn of 1998, bringing the total number of unemployed to 3.2% of the working population. This is expected to rise in excess of one million as the recent spate of high profile redundancy announcements begin to feed into these figures.
David Quick, managing director of CETA, said this rising trend could leave buy-to-let investors exposed to a number of unexpected risks.
He said: ‘This may cause unsuspecting landlords problems. If a tenant is made unemployed it may nullify the landlord’s household and contents cover as some policies do not allow properties to be let to people claiming benefits as they are perceived to be a higher risk. While this may be unfair, landlords need to be sure they have the right cover.’
He added: ‘This provides brokers with a good excuse to check clients have the correct policy in place.
However, with unemployment rising, there is also the risk that more tenants could default on their rental payments. As a result, Quick said, brokers should not neglect recommending cover for legal expenses. ‘Brokers should ensure that landlords have legal expenses in place ‘ this will allow a tenant to be pursued for unpaid rent through the courts.’