Rent Guarantee and Legal Expenses?
Providing you have done your tenant screening and verifying properly (see 20 Steps to Successful Landlording) you shouldn’t have problems with rent payments.
However, even the best tenants can sometimes have difficulty paying their rent through no fault of their own – if they fall ill, or they are made redundant.
In this situation you could have quite a long period without rent. If you are heavily mortgaged this is likely to put you under extreme financial pressure.
It may also be the case that you need to evict your tenant and spend money on legal fees to recover 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.
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 expense.
Protecting yourself with Rent Guarantee Insurance
Rent Guarantee and Legal Cover Insurance is good way to protect yourself from this sort of disaster. It’s especially 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. If you have a portfolio of properties your risks are spread and therefore this type of insurance is less important to you.
This insurance is relatively inexpensive, usually amounting to no more than about 3 to 5% of the rental amount – less than £100 for 12 months’ cover for an average let.
Tenant Checks and Referencing
Before you can get Rent Guarantee Insurance cover your tenant/s must be comprehensively verified with credit checks and references 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