When landlords sit down to run the numbers, the focus is usually on the significant, predictable expenses: mortgage repayments, repairs, maybe a letting agent’s fee. But lurking outside that neat little spreadsheet is another category of costs, one that’s less predictable, often forgotten, and potentially expensive to ignore.
We’re talking about compliance and insurance.
This includes:
- Landlord insurance
- Building insurance
- Safety checks (gas, electrical, fire)
- Compliance upgrades when regulations change (think smoke alarms, carbon monoxide detectors, fire doors)
These aren’t optional extras. They’re legal requirements, risk protection measures, and in some cases, lifesavers. Failing to keep up with them can result in fines, legal trouble, or leaving you financially exposed in a crisis.
The Accounting Problem With Overlooked Compliance Costs
The trap many landlords fall into is that these expenses don’t happen every month. Some are annual, some biannual, and some only appear when new regulations are introduced. Because they’re irregular, they tend to slip under the budgeting radar.
But here’s the thing: just because they’re not monthly doesn’t mean they’re not inevitable. They still come due, and if you’ve just paid for a new roof or a boiler replacement, those renewal notices can feel like salt in the wound.
From an accounting perspective, the issue is that irregular expenses are still fixed responsibilities. Treat them as “one-offs,” and you’ll always be playing financial catch-up.
How to Budget for Compliance and Insurance
- Keep a Dedicated Compliance Reserve Fund
Just like your maintenance fund, your compliance costs deserve their own separate account. That way, when renewal notices or upgrade requirements arrive, you already have the money waiting. - Track Renewal Dates Religiously
Maintain a simple compliance calendar listing when each insurance policy and certificate is due for renewal. This prevents last-minute scrambles and ensures you’re always in compliance. - Review Insurance Annually
Don’t just auto-renew your policies without question. Shop around each year to ensure you’re getting the right level of coverage at a fair price. Over time, small savings can add up to thousands. - Stay Ahead of Regulatory Changes
Regulations can change with little notice. By keeping an eye on industry news or working with professionals who do, you can budget in advance rather than being forced into reactive spending.
Conclusion
Compliance and insurance aren’t just boxes to tick. They’re the financial safeguards that keep your investments protected and your liabilities in check.
At Klarity Accounting, we help landlords and investors build these “non-monthly” costs into their annual budget, so they’re never blindsided and always fully covered. Because a profitable property portfolio isn’t just about making money, it’s about protecting it.
