Geoff Hall, managing director of Berkeley Alexander
Despite much being written about the Energy Act, including in Mortgage Solutions, according to research by HSB Engineering, less than 20% of UK brokers are aware of its impact on their property owner clients.
The new regulation applies to both residential and commercial property rented out in the private sector and came into force from 1 April for new tenants and will be applied to all existing tenancies by April 2020.
In summary, the new Minimum Energy Efficiency Standards (MEES) requires Property Owners to meet grade E as a minimum on their energy performance certificate (EPC).
Those who cannot meet this standard, or do not have a valid EPC, could lose significant amounts of rental income and non-compliance could lead to hefty fines and civil liability claims.
According to ARLA, hundreds of thousands of rental properties are still below the minimum E rating.
What has not so far been addressed is how brokers can protect clients from the huge impact a claim or fine of this kind could have on their business.
Help defend action and damages
While no insurance will cover the cost of fines from non-compliance, a good management liability policy will cover approved legal and investigation costs incurred as a result of any action, helping defend an action and cover civil damages awarded against the client.
These sums are often significant and would not be covered under a standard property owner’s buildings policy.
Clearly meeting the new obligations of the Energy Act is required, but there will always be those clients who, for whatever reason, fail to meet the standard.
Brokers have an opportunity to make sure their clients are aware of their obligations and advise them on suitable insurance cover should the worst happen.
If the storm should come, at least help to protect them from the breaking waves.
Suits advised sales
Some property owner’s policies provide an optional extension to cover management liability, but it’s not common as standard so check and advise accordingly.
It can also be purchased separately as a stand-alone policy if needed.
Management liability insurance can be a complex area of commercial insurance and so lends itself well to adviser-led sales.
While more common among traditional professions such as solicitors, accountants, doctors and dentists, the construction industry too is a hotbed for management liability claims.
Increasingly other commercially-regulated areas, including property, are also seeing heightened demand for the cover.
The premiums can often be quite high compared to other insurance lines and retention levels are good.
Brokers providing valuable advice on these more complex business critical and sometimes high premium insurances, are more likely to grow deeper trusted relationships with clients which in turn is also more likely to lead to greater cross selling opportunity.
The Energy Act has clearly brought its challenges to the market and it will be interesting to see over the coming months what the fall out will be and how well prepared landlords are for the impact.
For brokers though there is clear opportunity to be had from being equipped with the knowledge and having access to good advice and products that will support and protect many of their clients through these choppy waters.