Do I need commercial insurance for a privately owned property?

[Frederick102]

I own one property which is being used exclusively for hosting on Airbnb (England). Yearly capacity is around 25% max. The property is leasehold and I've been told by the management company that I need commercial insurance, at double the cost of 'normal' residential insurance as it's used as an Airbnb. 

Capacity is below the threshold to qualify as a holiday let, therefore not classed as commercial according to government guidelines I believe (but I might be wrong about this).

I'm assuming that the cover provided by Airbnb should be sufficient, so would like to find out if separate commercial insurance is indeed a requirement. 

Hope someone has has a similar experience who can advise.

Thanks,

Fred.

[Kitty-and-Creek0 · Accepted solution]

@Frederick102 

This is an important topic. Here in our part of California a business policy is necessary, no matter how often our space is booked. This is by government ordinance, as this is a business venture. Homeowners will not cover us at all, and what the platform provides is not adequate for the protection we are required to have. If your management company requires it, you are likely obligated to comply. You might start with the local government offices, and then to your homeowners insurance agent. STR is a special niche business, and regulations are constantly changing. I've been informed that as business owner it is our responsibility to be informed of the latest wrinkles in this evolution. This forum may not be your best source of specific local information so I urge you to go to the local source. Keep in mind that if your management company requires it, you may not be able to continue with a manager, regardless of the ordinances. They are in business too, and needing to protect themselves from liability. 

Best wishes and success in this!

[Emilie]

Hi @Frederick102, 

Have you just started working with this management company, or is this a new requirement?

In addition to Kitty's advice, I wanted to see if perhaps some of our other hosts on the UK have more insights on this matter: @Helen3 @Mike-And-Jane0 @Chamitha0 what do you think?

Thanks, 

Emilie

[Frederick102]

Hi Emilie, and thanks Kitty for your reply.

My property is a townhouse and on the ground level below is a small gallery which is owned by the freeholder. 

The maintenance fee, which includes the insurance has more tha doubled since I acquired the property a few years ago. I questioned the amount a number of times over the past few years but always get the same answer, that commercial insurance is required because I rent the place put for short periods. If this is indeed required I won't have a problem with it, however as mentioned I don't believe it qualifies as commercial as it's under the threshold with a mix of personal use and about 25% capacity.

The management company, despite numerous requests, has never provided me with any documents showing the insurance policy. I am considering getting legal advice to decide what to do next. I'll post the outcome here in case anyone else are experiencing a similar issue.

Thanks for the support so far!

Fred.

[Kitty-and-Creek0]

@Frederick102 

It would seem that the management has advice that you are a separate business from theirs, so you would need to have a separate policy. 

You might learn what constitutes a business use. The rules here are that any time we get paid for STR, no matter how occasionally, we need to be permitted and insured as a business. 

Your idea to get legal advice seems good. My instinct would be to consult the local government offices for advice, which is probably what the lawyer would do on your behalf if they do not already know these rules. 

Definitely let us all know what happens!

[Mike-And-Jane0]

@Frederick102 I think your definition of  commercial is flawed. ANY use as a short term rental makes it a business.

Looking in detail

Rent for 1 night per year - HMRC will tax you on the property income

Rent for 70 nights per year- VOA (part of HMRC) will classify it as business rated in England

Rent for 105 nights per year - Would have been a Furnished Holiday Let under 2024/5  tax regime