With landlords’ profits being squeezed due to the phasing out of mortgage tax relief as well as other legislative changes, and falling rents, some landlords may be turning to rent guarantee insurance in bid to protect themselves against tenant arrears.
An industry expert, however, says that while rent guarantee insurance offers some “excellent protection benefits” for landlords, there is “no point in buying the product if the landlord isn’t going to due diligence first”.
So says Richard Burgess, director at landlord insurance specialists Cover4LetProperty.
He explains: “It is every landlord’s nightmare – a tenant has defaulted on their rent or has absconded, and the cost of taking the necessary legal action to recover that lost rent is typically time consuming and very expensive.
“Even if you win your case against the tenant, overall you could still be out of pocket after paying legal fees. It’s a hopeless situation – unless you have rent guarantee insurance.
“There is no doubt that rent guarantee insurance can be an extremely useful policy for landlords to have. It gives the peace of mind that should a tenant fall in to rent arrears, or absconds owing you outstanding monies, then, with our cover, you will be compensated for loss of rent up to £1,500 per month for a maximum of 6 months (or until vacant possession has been attained).
“But – and it is a very big ‘but’ – what many landlords do not realise is that to enjoy the benefits of a rent guarantee policy, they must obtain one Credit Agency Reference (from a reputable Credit Reference Agency) and at least one satisfactory written character reference for each tenant.
“Failure to do so will render any claim invalid and it is this misunderstanding that gives rent guarantee insurance a bad reputation.Make sure you build in the necessary steps each time you take on a new tenant so your rent guarantee insurance will pay out in the event it needs to.”
Cover4LetProperty offers rent guarantee insurance (which includes legal protection cover). More details can be found here: http://www.cover4letproperty.co.uk/products/rent-guarantee-insurance/
Richard Burgess, MCIM, ACIEH, Cert CII, Director at Cover4LetProperty, telephone: 0845 863 9558 or email: firstname.lastname@example.org
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