Rent Guarantee Insurance

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    Rent Guarantee Insurance

    Hi

    I would be interested in your view on the following

    I received a renewal Legal & Rent Guarantee Insurance documents from Rentguard (which initiallyy I purchased through Openrent)

    There is the following condition in their 'statement of fact':
    "The responsibility lies with the landlord to make sure that if Tenants' circumstances have changed from those provided at the start of the Tenancy Agreemant and when the initial Tenant Referencing was completed, or there was a breach of tenancy agreement by the Tenant, then the Insured must complete a new reference on the Tenants"

    How can I know about their circumstances and be responsible for knowing this?
    What is the mechanism of making sure that 'Tenants' circumstances have changed' ?
    Why on earth they would allow me to reference them if they are already in the property?

    What is the point in such insurance?
    Insurance should mitigate the risk of tenants default.
    In this case, tenants are already in the property.
    If referencing shows they cannot pay rent, I will not get the insurance.
    If referencing shows they still can pay rent, I do not need the insurance or effective period of risk will be much less than a year.
    Also re-referencing tenants & guarantors doubles the insurance price for me.
    Basically, I mitigate risk of less than a year for a double price and this strange 'condition' would allow the Insurer always to escape from paying me

    They also charge me for the future policy amendment and mid-term adjustment!! Why?

    They offer renewal but it they cannot evict tenants, in the case of claim they will not pay rent guarantee

    In current situation, I cannot buy a rent guarantee from another insurer (nobody offers it to new customers).
    What would you do - go with this renewal just in case? or accept having no rent insurance guarantee?

    Thank you

    #2
    I think its one of the reasons why no experienced landlord I know takes out rent guarantee insurance

    Comment


      #3
      Contact an insurance broker and get their opinion. They should be quite knowledgeable, plus you've got the backup of their professional indemnity insurance and the Ombudsman if they sell you a policy that doesn't suit your needs.

      Comment


        #4
        Yes, RG insurance is pretty much a waste of time. And this is a ludicrous clause at so many levels. I'd drop the policy.


        Comment


          #5
          Insurance can never pay out more than it takes in premiums so you're on a hiding to nothing. The only way you'll ever win on insurance is if you have below average luck, but in that case you'd probably also find you'd forgotten to pay the premium 🤔

          Comment


            #6
            I guess the only point ever to insure is if

            a) You think they have calculated a too-low premiums based on the (correct) information you gave (extremely rare) so that you will statistically "win"

            b) If the event (if it occurs) will be life changing. Like medical travel insurance if you go to the US on holiday - if the event happens you and your entire family would be bankrupted

            c) It is compulsory (car insurance)

            Rent Guarantee insurance doesn't fall into any of these categories. And the T&Cs usually fall into the scam-artist category.

            Comment


              #7
              I’m in process of re letting my home ( it’s my only property) and the new rules and rights etc are making it all pretty risky anyway imho. However I have little choice in my situation. So I looked at rent guarantee insurance via two big rental agencies. One tried to sell me a policy with not a single word of warning about the pandemic exclusion from the agent until I requested a copy of the policy document. That document has a clause stating no cover for ‘ anything directly or indirectly related to a pandemic declared by the WHO’ ( rendering it useless in my view) . That policy cost £45pm. The second agent had removed any rent guarantee policy from their offer giving no reason when I asked and no comment on when it would be available and if then it would or would not exclude a pandemic related tenant job loss for example.

              The second agent went on to say they can get a tenant to pay six months up front and pay the following six months ahead after four months of the first tenancy agreement as a means of ‘getting round’ the issue of four months grace period before any eviction notice could be served and the now 3 month notice period required from a landlord.

              Has anyone come across this payment in advance ‘option’ like this? Any comments ?

              What do landlords who do not have a rent guarantee policy in place ( as above comments) do to protect/ reduce the very real risk these days of a tenant defaulting on rental payments ?

              Many thanks for your thoughts

              Comment


                #8
                You could take ten years of rent in advance into an escrow scheme.

                Or you could select suitable tenants.

                Comment


                  #9
                  I doubt anyone in this town has ten years rent. I’m obviously being Uber selective on tenants , but I also wondered about guarantors as well. Does a guarantor have the absolute obligation to cover rent defaults or can they avoid paying as well?

                  Comment


                    #10
                    If a guarantor agreement is valid at all (which is a BIG if) it is not going to be valid past the initial fixed term (no matter what it says) - so as much use as non-stick Sellotape or Jeremy Corbyn.

                    Comment


                      #11
                      I think you're looking for a zero-risk option, but property letting is an investment business with risk baked in.
                      I don't blame you! But I think you're going to struggle.

                      Like all of us, the rent guarantee insurance sellers didn't see the pandemic coming, and it wasn't covered in their calculations.
                      So they've just excluded it as a cause until there's some consensus about the risk and how it can be assessed.
                      No one has experienced something that stopped people going to work and caused the government to suspend possession hearings.

                      So if you want insurance, I suspect you're stuck with a pandemic get out for the underwriter.
                      A tenant who loses their livelihood because of a plague is just one of the things you have to consider in your planning, but there are some risks you simply can't mitigate completely.
                      Your loss of income is just collateral damage.

                      The advance rental mechanism your agent is proposing will be very difficult to get right - there's a risk that the six-month payment at four months is a deposit unless the wording of the agreement is spot on.
                      I also don't see how it "gets round" the four month limit on possessions and the 3 month notice period.

                      The three month requirement will come to an end shortly and we'll be back to two months, but the backlog of cases will be huge, so the period of notice is going to be the least of anyone's worries.

                      A guarantor can be useful - but you need to make sure the process and documentation are right.
                      There's a sticky thread on the subject on the forum.
                      I don't use them - although I think a parent guarantor might serve a purpose beyond actually making payments for the tenant.


                      When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                      Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                      Comment


                        #12
                        To AndrewDod
                        I have a guarantor on this Tenancy Agreement.
                        This is 12-month fixed and then becoming rolling (monthly) contactual agreement.
                        The guarantor is a party to the agreement (signed)
                        The agreement has the following clauses:
                        7.1 In consideration of the Landlord agreeing at the request of the Guarantor to accept the Tenant as the Tenant of the Premises the Guarantor agrees to fully cover and compensate the Landlord for any loss, damage, costs or other expenses arising either directly or indirectly out of any breach of the agreement or any extension of continuation of the tenancy including any rental increase agreed between the Landlord and the Tenant.
                        7.3 If the Tenant defaults during the initial Term or any extension, renewal or continuation of this agreement or the Tenant is declared bankrupt and the Tenant’s Trustee in Bankruptcy elects to disclaim the agreement then on written demand the Guarantor will cover and compensate the Landlord against all losses, claims, liabilities, costs and expenses arising out of or in connection with that default or disclaimer or incurred by the Landlord in connection with the default or disclaimer.

                        I believe the Guarantor will be liable at any point of this agreement (beyond 12 months as well)

                        What do you think?

                        Comment


                          #13
                          Originally posted by oi2004as View Post
                          ....I have a guarantor on this Tenancy Agreement.
                          ..................

                          What do you think?
                          HOW was the guarantee documented please? Enacted as a deed? Guarantor credit checked, given AST & guarantee and advised to take legal advice prior to signing, please?
                          I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

                          Comment


                            #14
                            To jpkeates
                            This is not about zero-risk option. The part which I do not like the most is that I become tenant-dependant for buying insurance.
                            They may not reply to my email about their circumstances
                            They may not provide correct information
                            They may not allow to run re-referencing (not everybody wants to disturb their employer)
                            They are already in the property with the signed tenancy agreement.
                            There are no incentives for them in allowing re-refencing or telling to me what their circumstances are

                            Also I was not told I will need to re-reference every year when I purchased the initial insurance

                            Now I always will be asking to confirm (in writing) whether this will be required when I buy an initial Rent Guarantee

                            I had not paying tenants in the past while having Legal & Rent Guarantee insurance. Legal insurance was definitely worth having as they have been doing all job for me but I would not say Rent guarantee was worth to have. they started paying after 3 months, on the 4th month I had hearing and the Guarantor paid all outstanding rent so I should return to the insurance company their payment.


                            Comment


                              #15
                              Originally posted by theartfullodger View Post

                              HOW was the guarantee documented please? Enacted as a deed? Guarantor credit checked, given AST & guarantee and advised to take legal advice prior to signing, please?
                              Not as a deed. The guarantor was a party to the tenancy agreement:
                              "It sets out the promises made by the Tenant and any Guarantors to the Landlord and vice versa, including the duration of the rental and the amounts you have agreed for Rent and Deposit. You should read this document carefully and thoroughly.
                              Once signed and dated this agreement will be legally binding and may be enforced by a court. Make sure that it does not contain terms that you do not agree with and that it contains everything you want to form part of the agreement. Both parties are advised to obtain confirmation in writing when the Landlord gives the Tenant consent to carry out any action under this agreement.
                              If you are in any doubt about the content or effect of this agreement, please seek independent legal advice before signing."

                              Guarantor was fully reference (inluding credit check)
                              Guarantor was given AST

                              Comment

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