The grass is always greener, as the saying goes. Unfortunately that is not always true if you are a managing agent arranging block buildings insurance for freeholders, residents’ associations and right to manage companies. Cannabis farms are an increasing problem, with one being found every two days in the capital according to Scotland Yard. A cannabis farm can be extremely destructive to property, and as it is considered illegal activity, the damage is unlikely to be covered by a standard buildings insurance policy.
Although it is sometimes possible to show a premium saving when changing insurers, agents need to be aware that there are some policy conditions that can trip them up!
Insurers are more commonly seeing claims for damage as a result of tenants using rented properties to farm cannabis. These claims can be fire related due to tapping into electrics illegally or just general damage caused during the process. In an attempt to reduce pay-outs of this nature insurers are taking a number of actions.
Some insurers have been and will continue to exclude any claims which is a result of illegal activity by the tenant. It is difficult to argue against that!
Other insurers are seemingly more flexible by extending their policy cover to include damage caused by a tenant who is using a property to farm cannabis illegally. Although this is obviously the better option it does come with some caveats. This is a sample of what Insurers are likely to expect:
- obtained a satisfactory reference* for each tenant and each guarantor from a licensed
referencing service before the tenancy started; and
- a detailed inventory of the contents and condition of the property (with supporting photographs) which the tenant has signed; and
- kept clear and up to date rental records
- performed internal and external inspections of the Premises at least once every 6 months and
- maintain a log of these inspections which You retain for a minimum of 24 months
- do not accept more than two months advanced payments of rent in cash
These are all pretty common-sense actions that might already take place in respect of every tenancy, however, not being able to comply with conditions of this nature could result in the insurer refusing to pay a claim.
Macbeth deal with a number of different providers for property insurance and can offer advice to agents as to the suitability of cover in respect of this area and many others.