To protect your business as a landlord, it is becoming vital to have rent guarantee insurance. Rent guarantee insurance is there to provide help with the loss of rent when a tenant falls into arrears or fails to pay, and eviction is the line of defense for a landlord, and also helps with legal fees.
Although the majority of tenants pay their rent on time and do not cause issues, there are some who regularly fail to pay on time or refuse payment altogether. This leaves the landlord with a shortfall, and no way of covering this outstanding balance to the lender, other than from their own pocket. If a tenant is falling into arrears, the first advisable step is to discuss this with the tenant and try to find a solution. If this issue cannot be resolved, the only step may then be to end the tenancy and take back the property. If a landlord has rent guarantee insurance, this can help bridge the gap of the cash flow issue resulting from the tenant failing to make payments.According to the latest figures from LSL Property Services, in March 2013 almost 8% of all rents were in arrears, amounting to almost £270 million.
It is the landlords responsibility to ensure they have the correct cover on their insurance, and before making a claim must ensure that the following has been adhered to, to enable a claim to succeed:
- The tenants must have a signed assured shorthold tenancy agreement of 12 months or less
- The landlord must have taken a cash deposit of at least one months rent
- The deposit must be held with an approved tenancy deposit protection scheme
- For Total Rent Guarantee Insurance the landlord or letting agent must have an Arc Legal Insurance approved credit and reference check on the tenants before they sign a letting agreement and move into the property
Tenant financial status is improving, however it is in the landlords best interests to ensure that they have rent guarantee insurance to protect their business.