For some time now, insurers and underwriting managers have been raising concerns over the practice of short-term holiday accommodation letting in buildings regarded as standard residential occupancy risk by nature.
The reality is that the moment a paying guest arrangement is entered into, a business relationship exists and the unit is no longer a residential risk but a commercial occupancy risk.
Not many insurers embrace holiday accommodation letting as a standard domestic or residential occupancy risk. The potential for larger liability claims arise when paying guests suffer a loss on the property, whether it be loss of possessions or loss of life or bodily injury. Standard residential risk policies do not provide for loss of business income in event that a unit become uninhabitable following a fire or another damage event. SASRIA (South African Special Risks Insurance Association) do not consider Air B&B or short-term holiday accommodation letting as a residential risk; therefore, it should not enjoy favourable SASRIA premium ratings.
As a result, problems can arise at claim stage where damages arise to units that are commercially occupied but benefiting from incorrect premium ratings.
While we are aware that many body corporate rules forbid the practice of short-term holiday letting, we also know that owners are very often ignorant of the rules and offer their units to holidaymakers quite innocently without realising the risks associated with this practice.
It is our view that, where there is short-term holiday accommodation letting happening, the body corporate or share block company should immediately notify the insurers so that the risk is disclosed accordingly. This will allow the insurer to apply any restrictive terms at their discretion or raise the premium as may be required.
Author: Brian Addison, Addsure
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