Guaranteed Rent – It’s Just Insurance?

Rent guarantee insurance is a type of landlord insurance that will pay out if your tenants fall into arrears. Many policies also include coverage for legal fees incurred if eviction proceedings are required to regain vacant possession. Policies are purchased at the start of a tenancy and provide insurance to landlords who have assured-shorthold tenancies, i.e there is some form of direct relationship between the landlord and tenant even if the landlord instructs a property manager. 

In a guaranteed rent scheme, the landlord has no direct relationship with the occupier and the middle tenant is liable for making the rental payments regardless of whether the property is vacant or the renter living there is in arrears. The middle tenant is also responsible for recovering arrears and regaining vacant possession from their subtenant. 

What are the benefits? 

There are several reasons why landlords are growing increasingly interested in the rent-to-rent alternative:

• it’s the most ‘hands-off’ option available for landlords with no time or inclination to be involved in any part of the lettings process
• it ensures that there is a regular, predictable cash flow and less risk of dealing with arrears
• there is less risk of having to enter legal eviction proceedings
• less risk of having to deal with damage and repairs
• local authorities are among the most reliable ‘tenants’ a landlord can find
• if a property is leased through a local authority, the landlord will be helping to provide housing for those most vulnerable and in need – which represents a huge positive contribution to the local community
• landlords receive payment from the middle tenant even when the property is unoccupied, meaning there are no void periods for the landlord