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Arthur and Advanced Rent: A guide to rent guarantee insurance

Industry Insight, Property News January 28th, 2020
Arthur and Advanced Rent: A guide to rent guarantee insurance

Why do landlords need rent guarantee insurance?

  • Sourcing reliable tenants can always be a challenging process. Landlords can find themselves in a position of losing income due to a tenant not paying Regardless of who the tenant is, sometimes there are unforeseeable events that transpire with the result of rent payments being missed. Examples of this can be sudden unemployment, which has knock on effects for landlords.
  • This can be devastating for smaller landlords, who could fall behind their own costs associated with running their units. Even for medium and large landlords and property managers, a shortfall in income is never good, and costs can rise considerably in legal fees if there is a need to evict the tenant.  According to the Ministry of Justice statistics on landlord repossessions, it takes 20.4 weeks on average to repossess a property, that’s over 20 weeks of potential lost income.

What is advanced rent?

Advanced Rent is an innovative provider of Tenant Referencing and Landlord Protection products, authorised and regulated by the FCA (Financial Conduct Authority). Rent guarantee insurance can be purchased for 6-12 months, and the cost of the insurance is tax deductible against all your rental income. The insurance will be able to cover you up to the maximum rent allowed on an Assured Shorthold Tenancy agreement which is currently £100,000 per annum or £8,333 per month, and the insurance can usually be activated once the tenant is one month in arrears. The Advanced Rent policy can also cover legal expenses for disputes over unpaid rent or eviction. The Advanced Rent policy can even cover damage to property caused by the tenant.

What will my Rent Guarantee Insurance policy cover?

 Landlord legal and rent protection is a legal expenses insurance contract which provides insured legal advice and representation in addition to rent indemnity in disputes relating to a residential property let.

  • Claims are accepted when unpaid rent is protected under the tenancy agreement for a period of 5-11 months (dependant on if your agreement is 6 or 12 months) until vacant possession is gained.
  • After vacant possession claims are continued to be paid at 50% of the monthly rent for up to 3 months if your property cannot be immediately re-let due to damage caused by the tenant.
  • Advanced Rent policy covers your property from tenant damage to the property as well as defending your legal rights if an event arising from a tenancy leads to police or prosecuting authorities intervening.

How to purchase the advanced rent Insurance policy via Arthur?

1a) Go to the tenancies screen and select ‘buy now’.

1b) Once taken to the rent guarantee index page, find the tenancy you would like to purchase insurance for and select ‘buy insurance’.

2) Once references are selected, Arthur will confirm the price for this insurance.

3) Complete the three-stage form to confirm details for the insurance provider.

4) Pay for the policies. Payment is not taken by Arthur but by Advanced Rent themselves.

Options for evicting a tenant?

By law, landlords will have two options to pursue when evicting a tenant. A Section 21 Notice should be the primary option. A Section 21 can be used where the fixed term of the tenancy has come to an end (or will do so in the next two months). It can also be used where the tenancy has no fixed end date (known as a periodic tenancy). It cannot be served where the tenancy started less than 6 months ago. The notice must give the tenant at least two months to vacate the property. Before a valid section 21 notice can be served there are several statutory requirements a landlord must have complied with. These include the protection of any deposit, providing the tenant with a Gas Safety Record, a valid Energy Performance Certificate (EPC) and the Government’s How to Rent Booklet.

The secondary option is a Section 8 Notice being served. If the fixed term of the tenancy has not come to an end, you can serve a Section 8 Notice if one of the Section 8 grounds has been met. These are based on acts of default by the tenant including rent arrears or late payment of rent, and damage to the property. Section 8 may also be preferable if there is a high rent on the property or the tenant is in significant arrears. The rent arrears ground only requires a landlord to give the tenant 2 weeks to vacate the property before a possession claim can be commenced.

Issues of evicting a tenant?

Not all tenants move out just because a notice has been served. If they don’t comply with the date in the notice, you must apply for a possession order, this will be done via a court hearing.

Unfortunately, most local housing authorities advise tenants that can’t pay their current rent, to stay in the property until evicted by bailiffs, otherwise they are viewed as making themselves homeless and will not be re-housed by the local authority.

The grounds for possession under section 8 are either mandatory or discretionary. Mandatory means the court must take possession, whereas discretionary means the court the decision to make a possession order. If you are dependent upon discretionary grounds, you need to be aware that the court is not guaranteed to permit possession. It is really important to get the correct notice issued under the correct grounds for possession and the Advanced Rent policy includes the cost of issue of this by experienced solicitors.