Holding Costs During a Refurbishment

A refurbishment does not pause your costs just because a property is empty and earning nothing. The mortgage, insurance, council tax and utility standing charges all keep running while the works are underway, and landlords who budget only for the building work itself are usually the ones who run out of cash before the property is ready to let.

This guide sets out the cost lines that continue during a refurb, the insurance notifications you need to make before starting work, and how to size a cash buffer so a project that runs long does not become a financial problem on top of a building one.

Cost lines

A refurbishment budget needs two separate columns: the cost of the works themselves, and the holding costs that keep accruing regardless of progress on site. The second column is the one landlords most often underestimate, because it does not show up on a builder's quote.

• Mortgage interest. Most buy-to-let mortgages are interest-only, so the monthly payment continues at the same rate whether the property is occupied, empty, or mid-refurbishment, with no rent coming in to offset it.
• Council tax. Some councils offer a short exemption or discount for an unoccupied property undergoing structural work, but many do not, or apply it only in narrow circumstances, and empty homes premiums in some areas can add a surcharge rather than a discount. Check the specific rules with your local authority before assuming a reduction applies. Our council tax on empty property guide covers what to check.
• Utilities. Standing charges for gas and electricity continue even with minimal usage, and you will usually need power and water connected for the works themselves, particularly for anything involving power tools, drying out plaster, or running a site cabin.
• Landlord insurance. Cover needs to continue, and in many cases needs to change, through the works period, which is covered in more detail below.
• Security. An empty property under refurbishment is a higher target for theft of materials, tools and fixtures, and for squatting, so many landlords budget for basic security measures such as door and window alarms or a lockable materials store, especially for a longer project.
• Waste removal. Skip hire or repeated tip runs are easy to forget when costing a project, but they add up quickly on anything beyond a light cosmetic refresh.

None of these are unusual costs. They are the ordinary price of the property standing empty for the duration of the work, and the only real risk is failing to add them to the budget before you start.

Insurance notifications

Standard landlord insurance policies are written around an occupied, let property, and many exclude or restrict cover once a property is empty or undergoing significant works, unless you tell the insurer in advance. This is one of the most commonly missed steps in a refurbishment project, and it matters because a claim made during unoccupied or unreported works can be refused entirely.

Before starting, check your policy for:

• Unoccupancy limits. Many policies only cover an empty property for a set number of consecutive days before cover reduces or lapses, and a refurbishment can easily run past that limit.
• Works notification requirements. Structural work, rewiring, and anything involving scaffolding or the removal of a roof often needs to be declared separately, and some insurers require a different policy type, sometimes called unoccupied property or renovation insurance, for the duration.
• Contractor liability. Confirm your contractor holds their own public liability insurance, since your buildings policy is unlikely to cover injury or damage caused by their work, and a gap here can leave you exposed if something goes wrong on site.

Calling your insurer or broker before work starts, rather than after a claim, is the only reliable way to know exactly what is and is not covered for your specific project. Our landlord insurance explained guide covers standard policy structure if you want the wider context before making that call.

Cash buffer

Refurbishment projects overrun more often than they finish early, both on time and on cost, and a holding-cost budget built on the assumption that everything goes to plan is the budget most likely to be wrong. A cash buffer specifically for holding costs, separate from the contingency you have (hopefully) already built into the building work itself, is the single most useful thing you can do to protect your cashflow.

A worked example. A landlord plans an eight-week refurbishment with holding costs (mortgage, insurance, utilities, council tax) totalling £900 a month, budgeting £1,800 for the two-month project. The works overrun to fourteen weeks because of a delayed delivery and an unexpected issue found once the old kitchen was stripped out. Holding costs for the extra six weeks add roughly £1,350 on top of the original £1,800, a total of £3,150 against an original plan of £1,800, entirely separate from any extra cost on the building work itself. A landlord who had budgeted a realistic buffer for delay would absorb this without touching personal savings or delaying the next stage of the project for lack of funds.

A sensible starting point is to budget holding costs for at least 1.5 times your realistic project timeline, since "realistic" projects still overrun for reasons entirely outside your control, such as material lead times, contractor availability, or something unexpected found once walls or floors are opened up. Our refurbishing a buy-to-let guide goes into more depth on planning a renovation project end to end, and our buy-to-let costs checklist sets out the fuller list of costs a rental property carries beyond the refurb period itself.

How Property HQ helps

Property HQ tracks holding costs against a property while it is off-market for works, separately from your live rental income and expenses, so you can see the true cost of a refurb period at a glance rather than reconstructing it from bank statements once the property is let again.

Disclaimer

This guide is general information for UK landlords, not legal, tax or mortgage advice. Council tax exemptions, insurance terms and lender policies vary and change over time - check current terms with your local authority, insurer and lender before relying on them for a project.