How landlords can guarantee their rent payments

Insurance policy that covers landlords against defaulting tenants

Date Published: 28/10/2009

Over the past decade it seems that almost everyone has become a landlord. First there were the amateur landlords lured in to the property market by the boom years that seemed to offer a road to riches then, following the collapse of the market, we saw the rise of the ‘unplanned lord’, the property owner that wanted to buy a new home but couldn’t sell their own so chose to rent out their existing property.

The one thing that rarely seems to get mentioned is that tenants are often totally dishonest and routinely fail to pay their rent

However, the one thing that rarely seems to get mentioned is that tenants are often totally dishonest and routinely fail to pay their rent. Add to this the ever increasing unemployment figures and there is a substantial risk that any landlord, no matter how careful, may suffer from defaulting tenants. As housing legislation becomes ever more tenant friendly it also becomes more difficult and expensive to evict rogue tenants.

Consequently the availability of a new insurance cover for landlords is a welcome addition to the market. Smartlandlord.co.uk is now offering landlords insurance cover both on rental defaults and the legal costs of eviction. They also include a tenant vetting service in the price of their properties.

They will cover up to £2,500 rent per month and offer either a six or twelve month cover option. Like motor insurance, there is a choice of either one month’s rental excess or none.

They claim to offer payment within fourteen days of any default by a tenant. Cover is also available for the costs of legal action and eviction of tenants up to a ceiling of £50,000.

As with any insurance, there are terms and conditions that must be adhered to: the rent guarantee insurance must be taken out before any tenancy agreement is signed or any tenants have moved in to a property, the premium payable is per tenant not per property, a full month’s rent and a similar amount’s deposit must be taken at the beginning of the tenancy, two forms of identification must be held on the tenant either by the landlord or their letting agent, a credit check must be run on any tenant.

These are all things that a sensible landlord should be doing anyway and at a cost of £80 to cover six months rent and legal costs along with a comprehensive reference service, the policy looks cheap.