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View Full Version : Rent guarantee insurance instead of S21?



Miffy
17-02-2007, 06:24 AM
I want to explore this as an alternative to S21 Sword of Damocles as a way of limiting my exposure to a putative non-paying tenant. I am interested because it seems the S21 could then be issued only if problems arise, but the rent guarantee would cover me if the tenant stops paying rent altogether as a reaction to being issued with an S21. Let's not make this a debate on the morals of S21 SoD, just the practicalities of this approach, please.

Any experiences gratefully received! Particularly:-

1) Do they only cover you for the first 6 months? If so, good for the minimum period, but no help later...

2) Do they in reality pay out or do they hide behind insurmountable obstructions or unanswered correspondence and phone calls (just because I am paranoid doesn't mean they aren't out to get me, you know!)

3) How long does it take to get a decision on a tenant? Might seem strange, but most of mine want to move in within a week or so!

Joanne Powell and DianeB, feel free to contribute again, even though you touched on this in another thread and I did take note of what you said there.

Joannepowell
17-02-2007, 09:47 AM
Miffy, I've not the the 'pleasure' of having the opportunity to use the rent guarantee as yet but have just managed to secure a policy on my new tenant and this cover is for a period of 12mths. The 12mths covers the property not the actual tenant so that's pretty good because if tenant moves at end of fix term I wouldn't have to pay out for a new policy with a new incoming tenant (though the new tenant would have to pass the relevant credit check).

My last policy was on the tenants and I never got a pay out because I didn't notify of the claim within 31 days of the claim becoming due. I intend to read my new policy with a fine tooth comb to ensure that I don't fall into the same trap again.

I had credit check completed and policy in place just 7 days after applying! I think it can be quicker than that but this new tenant is previously from Poland and having only been in the UK for 11mths I guess it may have added to the quoted timescale (the Tenent Verify company linked to this site do quote a couple of days).

Hope this little bit of info helps.

Kind Regards

J

MrShed
17-02-2007, 12:33 PM
Presumably these rent insurance companies require you to mitigate your losses as much as possible - ie evict as soon as possible? In this case, could they not in fact argue in the event of a claim, that the lack of early S21 has in fact meant that you have not anticipated potential future losses and as such have not mitigated your losses? Just a thought...

Joannepowell
17-02-2007, 12:55 PM
Don't start that one again MrShed.....

I would imagine that instructions on the course of action to be followed in the event of late/non payment of rent are given in the event of a claim being made. However, I can assure you that after the experiences I have suffered at the hands of non-paying tenants I would issue the relevant notices without ABSOLUTELY NO HESITATION in the event of the rent being just 7 days overdue!!! It's either that or apply for CHARITABLE STATUS!!! ;)

Miffy
19-02-2007, 21:03 PM
Thanks for the info, Joanne. Do you charge the tenant to do the reference (in case they fail you would be out of pocket) like an agency or do you pay it yourself?

DianeB
19-02-2007, 21:28 PM
Hi Miffy. As I mentioned on a previous thread I have used rent guarantee. They covered me for six months and are quite happy to take on another six months so long as the tenant is up to date with rent. They do the credit checks and it is done very quickly (although I cannot remember the speed - it was definitely well within 2 weeks).

My tenant did not pay 5th month or anything after. Therefore claimed for 2 months and received money within a month. As soon as my tenant was late with the rent my letting agent issued S21 (usual 2 months notice) but in the meantime insurance company issued S8 (10/11) and gave tenants approx 4 months notice to leave.

Tenants did not leave, insurance company took them to court where CCJ placed on tenant. Again, tenant did not leave, therefore subsequent possession warrant and eventual eviction all done by insurance co solicitors. (All this at no cost to me).

Insurance co told me they will pass file to their debt recovery team who will decide whether or not to enforce court order as tenants did not pay. (Which means they probably won't.)

Also insurance company asked me how much tenant owed up to the day of court hearing and put in claim to court for that amount. Any money owing after that date is up to me to recover if I want. Also, if I want to recover any of the money owed after insurance co pay out but before court hearing - they would give me court order to pursue it but if I managed to recover any of the money I would first and foremost have to pay their court fees.

Hope this isn't too boring for you!

What I will do in future is, again use rental guarantee, but then pay separately to get tenant out via S21 route which I think (and Joanne has confirmed to me) would probably be the quicker route.

Joannepowell
20-02-2007, 01:33 AM
Thanks for the info, Joanne. Do you charge the tenant to do the reference (in case they fail you would be out of pocket) like an agency or do you pay it yourself?

In answer to your question Miffy, I passed half the cost of the credit check + insurance onto the potential tenant. You are right in thinking the landlord would be well out of pocket in the event of the tenant not passing the criteria if the landlord covered the whole cost (+ potential tenants knowing they might not pass the credit check would deem that they had 'nowt to lose' by trying their luck if you (as landlord were footing the bill).

By asking for a contribution from the potential applicant you could weedle out those who believe they may well fail the check because they are unlikely to take the chance if they've had to 'cough up' towards the exercise.

The last check I did was a total of £80 (comprehensive credit check and insurance) and so I asked my applicant for £40. Given that there is no other admin charge (as there is with letting agents) she did not appear to have a problem with that. I covered the additional £40 which in my opinion is a small price to pay for peace of mind! Had she not passed the check I would've been £40 out of pocket but how much more out of pocket could I have been if I did not credit check and she went on to be a nightmare tenant who didn't want to pay the rent??? Like I say - small price to pay!

I was originally applying for rental insurance on the tenant but received a phonecall about the rental guarantee scheme which actually covers the property and lasts for 12mths. At £96.00 for the year that's less than £2.00 per week! As I'd put the rent up by £25.00 pcm (£300 per annum) on this property prior to letting I've more than covered my costs!!! The fact it covers the property will also reduce the cost of the next credit check I have to carry out (in the event she leaves prior to 12mths) because I will only have to fund the actual credit check and not the actual insurance for the remainder of the 12mth period.

I apologise for the fact that I never seem to be able to give a short answer.... :o

Kind Regards

J

Miffy
21-02-2007, 11:11 AM
I apologise for the fact that I never seem to be able to give a short answer.... :o



Not at all- very informative, thanks!

DianeB. Sounds like they have left you to fend for yourself after the fixed period so, as you say, S21 off your own bat coupled with rent guarantee at the same time.

coolestscottie
22-02-2007, 11:30 AM
what insurance company did you use please as I want to aviod ant more loss of money if i accept another tenant, I am in the process of regaining possession of a flat at the moment, and have had a lot of bad experience with tenants in the past

DianeB
22-02-2007, 15:49 PM
I used Homelet - the cost is approx £10 per month, paid up front, 6 month cover.

jeffrey
22-02-2007, 17:13 PM
what insurance company did you use please as I want to aviod ant more loss of money if i accept another tenant, I am in the process of regaining possession of a flat at the moment, and have had a lot of bad experience with tenants in the past

Also try MARAS?