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Rent & Legal Expenses Insurance

With monthly rents averaging £793.00 across England & Wales* in 2016, most landlords would consider it a problem if their tenant(s) failed to pay. Nobody can predict the future and peoples circumstances change. Everything from redundancy to long-term illness or separation of relationships can affect a tenants ability to pay rent every month, so why would any landlord want to risk losing their income when there is also the likelihood of a buy to let mortgage payment to think about?

“I cannot understand why every landlord is not covered by rental guarantee and legal expenses insurance, and this is particularly important for ‘accidental’ landlords who are often as much potential victims of the recession as their tenants”.

Property Ombudsman’s Christopher Hamer - www.residentiallandlord.co.uk

Coronavirus

  • Employment in the UK fell by the largest amount in over a decade between April and June 2020, official figures show. Employment decreased by 220,000 in the quarter, according to the Office for National Statistics
  • Over 140,000 redundancies announced in June 2020 alone
  • 730,000 redundancies since the start of the pandemic and this will grow when the Government Furlough scheme ends in October 2020
  • Courts remain closed until September 2020 and there will be huge backlogs when they do re-open, there is also a risk that they will be stayed for a further period of time
  • The whole process to evict a tenant remains lengthy and costly, where a Section 8 could have been served on mandatory grounds giving 14 days notice pre pandemic, it is now necessary to give 3 months notice, allowing tenants to amass 5 months worth of arrears before an application can be made to court
  • In the case of claims brought before 3rd August 2020, which have been stayed, a notice will need to be filed and served to “reactivate” the claim at a cost
  • For any claims brought on or after 3 August 2020, a notice will need to be either filed with the claim form (section 21 claims) or brought to the possession hearing (section 8 claims) and served on the tenant 14 days beforehand, again at a cost to the landlord
  • There is a backlog of over 60,000 possession hearings in the court system
  • Estimated 226,785 are now in arrears despite having been up to date in March 2020, out of a total of 442,403 renters
  • Many insurers have withdrawn from the marketplace entirely or are not paying out on claims

Rent Arrears Facts

  • The unemployment rate for April to June 2016 was 4.9% but was 8.5% back in 2011. **
  • Currently 9.3% of all rent due has been confirmed “as arrears of one day or more”. ***
  • As of Q1 2015 there were 70,900 tenants facing more than two months of unpaid rent e.g. severe rent arrears. ****
  • The annual Let Alliance Landlord Survey (Dec 2015), 76% of Landlords stated they would like their rent guaranteed and all legal expenses paid for if tenant eviction was required.

Key Features

  • Nil excess as standard
  • 100% of rent arrears payable for a maximum of 15 months (up to a maximum of £50,000) or until vacant possessions (whichever comes first)
  • 75% of rent paid for up to 3 months after vacant possession is achieved
  • Covers the monthly rent up to £2,500 (up to 4 tenants but excluding houses of multiple occupation)
  • £100,000 legal expenses in order to obtain vacant possession
  • Available for all tenant types (including housing benefit)
  • The insurance policy is held against the property (not the tenancy) allowing the tenants to change without an impact on your policy (subject to any new tenancies meeting the qualifying criteria below)
  • The cost of the insurance is fully tax deductible
  • Click here for further policy information.

Qualifying Criteria

  • A deposit equal to a months rent or greater must be taken
  • You must instruct a professional property inventory
  • We must be fully managing the property going forward

Price List

Length of Tenancy Price (inc. VAT)
12 months 3% + VAT of the annual rent (payable upfront)

Source
*    www.lslps.co.uk/documents/buy_to_let_index_may16
**   www.ons.gov.uk/employmentandlabourmarket/peoplenotinwork/unemploymenty_to_let_index_may16
***  www.lslps.co.uk/documents/buy_to_let_index_may16
**** www.lslps.co.uk/documents/tenant_arrears_tracker_may15