Landlord’s Rental Guarantee and Legal Costs?
Rent Guarantee insurance is designed to protect you the landlord against tenants failing to pay the rent. This policy covers rent arrears up to £15,000 per claim. An excess of one month’s rent applies. The policy will also cover up to £25,000 for landlords legal costs. Tenants/Guarantors must pass a TenantVERIFY Comprehensive Check.
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Providing you do thorough tenant screening and verifying ( see: Tenant Screening) you should reduce your problems with rent payments to a minimum.
However, even the best tenants can sometimes fall on hard times, when paying their rent can become a problem, through no fault of their own – if they fall ill, or they are made redundant.
This could mean that you have a period of several months without a rent payment. If you are heavily mortgaged this is likely to put you under extreme financial pressure – in fact for some landlords it will be a disaster as they could lose their property.
In the event of a serious rent arrears problem you may have not choice but to evict your tenant and try to recover the lost rent. Councils will not re-house your tenants if they leave voluntarily, so your tenant/s will be advised to stay put until evicted, even if they cannot pay rent.
Re-Possession and eviction proceedings can take months, so in the meantime you may have no rent, you have the added expense of legal costs and, when you do eventually get possession, you may find there’s damage to your property – all this can run to a lot of money.
Protecting yourself with Rent Guarantee Insurance
Rent Guarantee and Legal Cover Insurance is good and sensible way to reduce risk and protect yourself from this sort of disaster. It’s most important for landlords with only one or two properties which are heavily mortgaged – where your investment would be at risk if you cannot keep up your mortgage payments. Landlords with a portfolio of properties have their risks spread between all their properties and tenancies so this type of insurance is less important to them.
The Rent Guarantee and Legal Expenses insurance is relatively inexpensive, usually amounting to no more than about 3 to 5% of the annual rental amount – often less than £100 for 12 months’ cover for an average let.
Tenant Checks and Referencing
Before you can take out Rent Guarantee Insurance cover, your tenant/s must be comprehensively verified, credit checked and referenced with an approved credit reference agency – and they must reach a minimum credit score – see theTenantVERIFY® website for more information.
Tenant verifying or screening is arguably the most important part of a landlord’s or agent’s task: it’s vital that you get the pre-letting procedures right – see Tenant Screening.
Nice car, nice suit, nice chat – no rent! Don’t get caught out – successful landlords have mastered the art of selecting their tenants very carefully. Follow the process of tenant verifying conscientiously, make NO exceptions and ALWAYS do credit checks and references – see www.tenantverify.co.uk©LandlordZONE® – legal content applies to England and is not a definitive statement of the law, always seek professional advice. If you have questions on these issues go to the LandlordZONE® Forums