Small landlords will be forced out of PRS and replaced by money-motivated landlords

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Small landlords will be forced out of PRS and replaced by money-motivated landlords

Small landlords who care about their tenants will sell up in 2026 and be replaced by “money-motivated landlords” due to new regulations, claims legal experts.

The Daily Telegraph reports mounting regulations, such as the Renters’ Rights Act, will see small landlords exit due to high costs and increased council powers.

Under the Renters’ Rights Act, councils have the power to fine landlords up to £40,000.

Smaller landlords will leave the market

Phil Turtle, compliance director from Landlord Licensing & Defence told The Telegraph: “Small landlords will inevitably be the first to sell up, worsening supply levels.

“What is already happening inevitably is that the older-style landlords who really cared about their tenants and providing decent homes for them will leave.

“New money-motivated landlords will replace them, but the focus will be on picking up properties cheap from distressed existing landlords and maximising profits.”

Mr Turtle warns that increased council powers will make it unprofitable for smaller landlords to remain in the market.

He said to The Telegraph: “Smaller landlords are going to quit the market. There are so many extra punitive fining opportunities under the Renters’ Rights Act for the councils’ money-making machine.

“Anyone with their pension tied up in property can only see the councils taking it away through massive fines for the most simple of mistakes.

“Now any slip-up on a tenancy agreement or the pre-tenancy paperwork is going to cost a minimum of £4,000 fine with, just like speeding, no leeway or compassion available from power-crazed councils enforcement officers.”

Paul Shamplina, founder and manager of legal firm Landlord Action, adds: “Self-managed landlords are more vulnerable to these penalties.

“More landlords will need to hire a letting agent, further eating away at profits.”

Good landlords have nothing to fear

However, the government claim the reforms will help landlords and tenants.

A spokesman for the Ministry of Housing, Communities and Local Government told The Telegraph: “Good landlords have nothing to fear from our Renters’ Rights Act

“Our landmark legislation will level the playing field by giving renters greater security in their homes, while landlords will benefit from a simpler tenancy system and stronger powers to take swift action against anti-social behaviour.”

However, as previously reported by Property118, industry experts have warned the Renters’ Rights Act will cause an “inevitable influx” of court cases, putting pressure on the courts.

Under the Renters’ Rights Act, Section 21 will be abolished, meaning landlords will need to rely on specific grounds for possession using Section 8 notices.

A spokesperson for the NRLA told Property118: “Wait times within the court system have become chronically over-extended over recent years, long before the government announced implementation dates for the Renters’ Rights Act.

“We expect that the introduction of the Act will lead to substantial, additional, increases in court wait times as a consequence of the removal of the accelerated procedure and increased complexity.

“As a result, we continue to urge the government to announce how they intend to reform the process ahead of the inevitable influx of cases into the court system. Without a coherent solution to this problem, there is a huge risk that the issues around court wait times will only be compounded by a lack of action”.

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Underinsurance and the Average Clause – Avoiding Reduced Payouts

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Underinsurance and the Average Clause – Avoiding Reduced Payouts

Underinsurance is one of the most expensive mistakes a landlord can make. If your sum insured is too low, insurers can apply the average clause and reduce any claim in the same proportion that you are underinsured. The reduction can hit every part of the claim – buildings repairs, contents, and sometimes loss of rent – turning a manageable incident into a major capital hit. This article explains how average works, where landlords go wrong, and how to set accurate sums insured so claims pay in full.

What Is Underinsurance?

Underinsurance occurs when the amount you insure (the sum insured) is less than the true value the policy requires. For landlords, this usually means the rebuild cost of the property (not the market value), including professional fees and debris removal, or the replacement cost of landlord contents.

How the Average Clause Reduces Your Claim

Most landlord policies contain an average clause. If you are, say, 25% underinsured, your payout can be cut by 25% on any claim – not just total losses.

Example (buildings):

• True rebuild cost: £300,000
• Sum insured on policy: £225,000 (i.e. 75% of the true figure)
• Escape of water claim value: £40,000
• Average applied: insurer pays 75% of £40,000 = £30,000 (before excess)

That missing £10,000 comes out of your pocket. If the same proportional reduction is applied to loss of rent linked to the buildings sum, your income cover may also be trimmed.

Rebuild Cost vs Market Value – Not the Same Thing

Market value reflects land, location and demand. Insurers need the cost to rebuild the structure to current standards: materials, labour, professional fees (architects, engineers, surveyors), debris removal, plus any code-compliance upgrades (e.g. HMO fire doors, emergency lighting). In London or prime areas, the market value may be far higher than rebuild; in other regions, rebuild can be surprisingly close. Always insure for rebuild, not sale price.

What to Include in a Buildings Sum Insured

• Full rebuild cost of the dwelling to an equivalent specification.
• Professional fees – architects, engineers, surveyors, planning fees.
• Debris removal and site clearance.
• Outbuildings, walls, gates, fences, drives and paths if the policy requires them within the sum insured.
• HMO upgrades – fire doors, alarm systems, emergency lighting where installed.
• VAT if you are not VAT-registered and would have to pay VAT on rebuild works.

Check your policy: some include professional fees and debris removal within the buildings sum insured; others add separate limits. Either way, make sure the overall allowance is adequate.

Contents and Landlord’s Fixtures

For furnished lets, set a realistic landlord contents sum insured covering furniture, appliances, curtains/blinds and floor coverings you own. Avoid relying on a token limit (e.g. £5,000) if you’ve installed quality furnishings. Remember that tenants’ possessions are not covered by your policy.

Loss of Rent – Amount and Duration

Loss of rent is usually limited by time (12, 18 or 24 months) and sometimes by a monetary cap. Two frequent problems:

• Too short a period – complex reinstatement (fires, subsidence, listed buildings) can exceed 12 months. Consider 18–24 months.
• Linked to buildings underinsurance – if your policy measures loss of rent as a percentage of the buildings sum or applies average across sections, underinsurance can reduce income cover too.

Day One Reinstatement and Declaration-Linked Cover

Two features that help protect against underinsurance:

• Day One Reinstatement – you declare today’s rebuild value (the declared value), and the policy adds an automatic uplift (often 15–50%) to absorb cost inflation between policy start and a potential claim. You must still get the declared value right.
• Declaration-linked (adjustable) policies – common on portfolios; you declare values annually and the insurer applies an uplift and/or adjustment at year end. Again, the starting figures must be sound.

Index linking helps mid-term, but it does not fix an initially wrong declared value. Garbage in, garbage out.

How Landlords Commonly Underinsure

• Using the purchase price or mortgage valuation instead of rebuild cost.
• Forgetting professional fees and debris removal.
• Ignoring extensions, loft conversions and HMO upgrades completed since the last review.
• Not including outbuildings, boundary walls and hard landscaping where required.
• Setting a 12-month loss-of-rent limit for properties that would realistically take longer to reinstate.
• Assuming the freeholder’s block policy makes you safe when you still have landlord contents and loss of rent exposures within your demised areas.

Leasehold and Blocks – Who Insures What?

In flats, the freeholder (or RMC) often insures the building. You still need cover for landlord contents, loss of rent (if your lease allows you to insure it), and liability. Ask for a copy of the block policy and check sums insured, perils (including escape of water) and excesses. If the block is underinsured, you carry indirect risk through delays and shortfalls.

Waiver of Average – Rare but Valuable

Some specialist insurers offer a waiver of average or a limited tolerance (e.g. no average if within 10–15% of the correct value). It’s not universal and usually comes with conditions (professional valuation, Day One wording). If available, it provides a safety net but is not an excuse to lowball sums insured.

Worked Example – Getting the Number Right

Two-storey semi, extended kitchen, HMO upgrades (fire doors/alarms).

• Base rebuild estimate (current rates): £240,000
• Professional fees (10%): £24,000
• Debris removal/site clearance (7%): £16,800
• Outbuildings/boundaries/hardstanding: £9,200
• Total declared value: £290,000
• Day One uplift (25%): policy limit effectively ~£362,500

If you had insured at £220,000 “to save premium”, you’d be ~24% light at inception, and average would bite on every claim.

Practical Checklist to Avoid Underinsurance

• Get a rebuild assessment – commission a professional valuation or use a recognised calculator and sanity-check unusual features (listed status, basements, high-spec kitchens).
• Add fees and debris removal – ensure your allowance matches your policy structure.
• Include VAT if you are not VAT-registered.
• Review after works – extensions, lofts, conversions and compliance upgrades all increase rebuild cost.
• Use Day One with an appropriate uplift (often 25–35% on portfolios).
• Right-size loss of rent – set both monthly amount (your actual rent) and duration (consider 18–24 months for complex risks).
• Portfolio housekeeping – maintain a property schedule listing declared values, contents limits, loss-of-rent months, excesses and special features.
• Ask about waiver of average – if your insurer offers it, understand the conditions (e.g. professional valuation within 3 years).

Final Thoughts

Average is not a technicality; it’s a powerful clause that can strip thousands from a valid claim. The cure is straightforward: set accurate sums insured, use Day One where appropriate, and review values after any works. Treat these steps as part of your risk management, just like inspections and certificates. When a claim happens, you want the policy to pay in full – not 75%.

Request your quote or call-back

The most efficient way to get a personal quote with the best price and cover possible is to call the team on 01832 770965 so we can focus on your enquiry when you are ready and sitting down with your portfolio details to hand.

Alternatively, you can use the form below to request one of our team to give you a call back.

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Publication date: Tuesday 6 January 2026

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Scotland’s largest landlord is buying homes for social rent

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Scotland’s largest landlord is buying homes for social rent

Scotland’s biggest registered social landlord has begun buying homes across Glasgow to boost the city’s supply of affordable housing.

Wheatley Homes Glasgow is using funding from the Scottish Government and backing from Glasgow City Council.

The programme will see each property being refurbished before being offered at social rent to households facing urgent need.

The provider says home purchases will continue until March 2026.

Offering market value

Owners who sell will be paid market value and offered what Wheatley describes as a clear, supportive transaction, with no obligation to proceed.

The landlord is prioritising streets and developments where it already operates, although homes of any size or type will be considered, including properties not yet listed for sale.

Housing Secretary Màiri McAllan said: “I warmly welcome this new approach taken by Wheatley Homes where, in partnership with Glasgow City Council, they are working to rapidly increase the number of homes available to families and tackling waiting lists.

“In my Housing Emergency Action Plan published in September this year, £80 million was made available for the immediate purchase of properties to reduce pressures in the need for social homes – £24 million of that went to Glasgow City and is now helping to fund this work.”

Contact Wheatley to sell

Homeowners in neighbourhoods where Wheatley already has stock are being encouraged to make contact if they are thinking about selling.

After a valuation, the organisation can submit a no obligation offer, even when a property has not been placed on the open market.

Managing director Aisling Mylrea said: “There is a huge demand in the city for social housing.

“This project is just one way we are helping increase the number of homes available to families and other people on housing waiting lists.”

She added: “Thanks to funding from the Scottish Government, we can buy homes which are on the open market or speak directly with owners who are thinking of selling.

“We are looking at many different ways to increase the number of available homes for social rent in the city, whether that’s thanks to our own new build programme, buying directly from housing developers or through this new project.”

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