Rent Guarantees
As a landlord and also as a letting agent I have become increasingly concerned with the current legislation by the Scottish government that we are not allowed to evict tenants, so I’ve put certain things in place personally for my own properties that if the tenant defaults for any reason I’m still going to get paid for me my properties as they are there as an investment and they also provide a monthly income for me. I want to make sure that that my income is secure that it’s stable and that I’m not going to get any nasty surprises.
What I’ve done is I’ve started taking out rent guarantees for my properties. When a new tenant moves into a property, I take out the rent guarantee insurance. I realize that I can’t take out a rent guarantees for tenants that are already in properties as far as I know, but where tenants move out of properties and I re-let them, I’ve decided to take out rent guarantees. As an example, I have a property where the rent is a thousand two hundred pounds a month. If the tenant defaulted, for me to lose £1200 pounds per month is quite a heavy knock. So I’ve decided for that particular property to take out a rent guarantee. There’s no major risk because we put the tenant through credit and reference checks and they seem like a good tenant, but people’s circumstances change, people get divorced, people die, people lose their jobs for whatever reason, if a tenant can’t pay their rent then at least I’ve got the rent guaranteed through an insurance company that will protect me.
As a company, our offices are now starting to offer these rent guarantee services to landlords. The costs, in my opinion, are fairly minimal in comparison to the cover that they give. The cover can vary from company to company and property to property but generally speaking, you’ll get up to a year or maybe even a year and a half’s worth of rent if the tenant defaults and that’s how long it takes to get the tenant out the property. So as much as there is an eviction ban at the moment, we can still give tenants notice as you would have heard in some of my previous videos. But if the tenant refused to move out of the property, we would just hand it over to the insurance company and the insurance company would deal with it.
Not only does the rent guarantee cover the rent but it also covers the legal costs of getting the tenant out of the property. If it took longer than 15 months to get the tenant out the property then you would only be covered for 15 months but generally speaking, it shouldn’t take that long to get a tenant out of a property, possibly a year, but probably eight to ten months.
With this in mind, I think that rent guarantees are a good idea especially for the upper end of the market where rents are quite high. If a tenant defaults it is quite a heavy knock so in my opinion, I think rent guarantees are a good idea and it’s something that I’m going to be offering to our landlords. If you’re a landlord and you’d like a rent guarantee on your property or if you’re dealing with a difficult tenant, please get hold of me at Pure Property Management.