Landlord Rent Guarantee Insurance Guide

As a landlord, you will need different kinds of insurance to protect your property investment against potential accidents, damages or unforeseen calamities. Many landlords just have simple buildings cover, but rent guarantee insurance is one thing that you cannot pass up, as it safeguards one of the most unpredictable aspects of renting properties: the reliability of tenants. This guide will explain what rent guarantee insurance is and why you need it, as well as guide you through the process of how to obtain and use the insurance if necessary.Landlord Rent Guarantee Insurance

What is Rent Guarantee Insurance?

This insurance ensures that you are protected financially in the event that a tenant fails to pay their rent. When the tenant arrears on the rent, the insurance will reimburse the cost of the rent, although depending on the insurance policy it might not pay out if the rent goes into arrears. This insurance is not covered in most landlord insurance policy packages, so you need to get rent guarantee insurance on top of that. The insurance is reasonably cheap, going for as little as £90 for a twelve-month policy.

Why It is Important for Landlords

In hard economic times, more and more tenants are finding it difficult to meet their rental commitments. In the private rented sector, more people are being evicted as a result of being unable to pay their rent. But merely evicting a problem tenant will not reimburse you the money you are owed for renting out your property. After all, the time using the property that hasn’t paid for could have been time spent finding and letting out to a tenant who could have paid the rent. While a landlord can go some way towards discerning reliable from unreliable tenants on the basis of tenant referencing and credit reviews, you still can’t foresee the unforeseeable. Personal tragedies may render a tenant unable to pay.

A tenant may be in a difficult situation economically, but they could also simply prefer to use their money in ways other than paying the rent. They might think, if you’ve allowed them to pay the rent late on previous occasions, that you are a soft touch and that they can get away with it. But this sets a precedent for them exploiting your generosity. The tenant-landlord relationship can be tricky to navigate, because nobody wants to kick someone out on the streets if they can avoid it. But this can lead landlords to be overly cautious when dealing with problem tenants. If you are in the undesirable circumstance of having to take a tenant to court for the rent, having rent guarantee insurance gives you more financial security and will probably make the process quick and painless for everybody.

Many rent guarantee insurance packages cover legal costs for this very circumstance. Legal costs can be punishing, the rent owed might be substantial but still not enough to justify the cost of a lawyer. Another common part of the package is eviction costs. These costs can include court costs if the case goes to court, as well as the cost of looking for a new tenant, and the cost of removals if you agree to cover those for the sake of expediency, to free up the house for a new tenant.

But is it worth it to get rent guarantee insurance? In the circumstances where a tenant is unable to pay for rent, it is unlikely you’ll be able to get that money back unless you take them to court. This is why the insurance matters because it is more likely to pay out as more tenants face financial instability and are unable to pay their rent.

How to Get Rent Guarantee Insurance

So how do you go about getting rent guarantee insurance? And how do you ensure that you get a good deal? The first step is to research the different rent insurance policies available. Some more general landlord insurance policies might cover rent guarantee, so make sure that it is not already included in your existing insurance package or a package that you are thinking about investing in.

Also, look closely at the caveats, as well as the circumstances in which the insurance pays out. Is there an upper limit of how much the insurance will pay out? Does this cover legal and eviction costs? This will determine how you budget for court cases or maintenance on the property. Also, how long after the tenant has stopped paying rent will the insurance start to pay out, as it may take a time to authenticate and process the insurance claim? Will the property be usable during this period, and if not do you have other sources of income?

Many rent insurance policies include restrictions on tenant types, e.g. students or people not legally in the UK. This will mean that the insurance company will have to perform a background check on the tenant, which may result in it taking more time.

Once you’ve decided on the insurance package that is right for you, you should seek legal and financial advice before investing in the insurance. If you can, talk to people who have had this kind of insurance to see if it was useful to them and could be helpful to you as well.
Investing in this insurance policy will relieve you of the worry that a tenant could run off with your money. This means you can concentrate on the main stuff, such as maintaining the quality of your property, as well as staying on good terms with your tenants.

What Can I Do If My Tenant Left Me With A Drain Blocked?

Landlords and tenants both have responsibilities relating to the property being leased – while landlords shoulder the biggest responsibility in terms of keeping the property in repair. Tenants are also expected to use the property in a ‘tenant-like manner’ – that is, not cause damage to the property and pay for the repair of any damage that is caused.

In most cases where repair is needed, it is obvious who is responsible – but what about if your tenant blocks the drains?
Section 11 of Landlord And Tenant Act 1985 makes clear the landlord’s responsibilities regarding upkeep of the property:

Landlords and tenants both have responsibilities relating to the property being leased – while landlords shoulder the biggest responsibility in terms of keeping the property in repair.My Tenant Left Me With A Drain Blocked?

Tenants are also expected to use the property in a ‘tenant-like manner’ – that is, not cause damage to the property and pay for the repair of any damage that is caused. In most cases where repair is needed, it is obvious who is responsible – but what about if your tenant blocks the drains?
Section 11 of Landlord And Tenant Act 1985 makes clear the landlord’s responsibilities regarding upkeep of the property:

“the landlord must:

  • keep in repair the structure.
  • keep in repair exterior of the dwelling, including drains, gutters and external pipes.
  • keep in repair and working order the installations in the dwelling for the supply of gas, electricity, water and for sanitation (including basins, sinks, baths and sanitary conveniences but not other fittings, appliances and fixtures for making use of the supply of water, gas or electricity, and
  • keep in repair and proper working order the installation in the dwelling for space heating and heating water.”

Therefore, in most cases, a blocked drain would be the landlord’s responsibility.

The tenant’s responsibilities are harder to define clearly as they are not set out in legislation; however Letlink draws attention to a test case from the 1950s (Warren v Keen), in which the judge, Lord Denning, had the following to say:

“What does ‘to use the premises in a tenant-like manner’ mean?  The tenant must take care of the place. He or she must unstop the sink when it is blocked by his waste.  In short, he or she must do those little jobs about the place, which a reasonable tenant would do.”

Therefore, common law would suggest that part of the tenant’s responsibilities is to use the property’s drainage appropriately and clear any blockages caused by their waste.

What can landlords do to ensure that this responsibility is honoured?

It would be wise to write in the Tenancy Agreement your expectations of the tenants regarding the use of the drains and related items, for instance, not pouring cooking fats down the sink or flushing sanitary items down the toilet. If you do not include this in the Tenancy Agreement, make sure the tenant is otherwise aware of this.

You can also reasonably ask them to attempt to clear any blockage using a plunger and drain cleaner, bleach and/or hot water before contacting you. You should also check the drains when inspecting the property prior to the tenant leaving – if there is a blockage they have caused, you could be entitled to keep some or all of their tenancy deposit to cover the cost of clearing the blockage.

Of course, if your tenant has already left when you discover the blocked drain, there is little to nothing you can do about it. If you had completed a property inspection before their leaving, signed everything off and returned the deposit, the liability for repair falls to you. Therefore, it is vital that your tenants are aware of their responsibilities, and you thoroughly check the property over before they leave.

 

Landlord Health And Safety Precautions- Explained

According to the British government website (Crown Copyright) and the 2004 Housing Act, it is landlords’ responsibility to keep their rented property safe and free from health hazards. This means that landlords need to take proactive actions as a must to ensure tenants healthy and safety conditions during their tenancy agreement. In this article, we outline some of the important safety and healthy precautions a landlord must take. First, let us explain the safety ones:

Gas safety:
If your property has a gas central heating installed, the first thing to do is to check when the next maintenance is due. The same applies to gas boilers. It is recommended that landlords carry out annual gas safety inspections with registered engineers. This maintenance should include a full check on the appliances and tubes installed across the property. It is vital to remember that you as a landlord will need to keep a copy of the gas safety certificate. You will need to give it to the estate agent who is renting the property on your behalf and/or tenants who have the rights to ask for it.Landlord Health And Safety Precautions

Here it is important to remember that you as a landlord need to receive your gas safety certificate within 28 days and make a note of when the next inspection is due on.

Electrical safety:
If you are renting your home with some electrical appliances, such as freezer, toasters, cooker, kettle and washing machine, it is it is important that you check they are working in perfect order. On top of that it is important that you check that all sockets are working properly and are safe to use. The same precautions apply to electric showers (if you have one) and light fittings. A registered engineer should give you a certificate that your fuse box is working and that all electrical devices have fully passed the safety tests.

Fire safety:
Landlords should be aware of the fire safety regulations. A very fundamental law is the fire alarm, sometimes misinterpreted as carbon monoxide alarm or smoke alarm. All properties in Britain should have smoke alarm strategically fitted around the house or flat. The batteries of the smoke alarms should be inspected regularly. With regards to flats and buildings, access to escape routes should be clearly sign posted, and extinguishers should be ready for action. One of the precautions that landlords can also take is to state clearly in the tenancy agreement that electrical appliances should be switched off if the tenant will be away for more than three weeks. Also, if you as a landlord is providing furniture or furnishings, such as a bed, mattress, sofa and table, for example, it is important to highlight that these must adhere to fire resistance policies and regulations.

Beyond providing safety precautions, the landlords must also ensure healthy ones. Here are some that landlords need to take into account:

Water heating: not too hot nor too cold. The taps in the sink, basins, toilet and other parts of the house must clearly display the difference between hot and cold water. Also, it is important that the water central valve location is easily reached in case a sink or toilet need fixing.

Mould and Damp: landlords must ensure that the rental home is damp and mould free. This is a safety issue as dump and mould is recognized by NHS as one of the root causes for respiratory and eczemas issues.

No trip hazards: imagine if you have a misplaced floor carpet in your rental home. This is a fall hazard and safety risk. Imagine if you have a staircase and one of the steps are dislocated. This is also a safety risk. The inspection of the place must assess that there are no trip hazards that can cause an accident to your tenants.

As a landlord, you must remember that you are potentially liable under the Defective Premises Act if the resident suffers death or injury as a result of a health and safety gap. It is important that safety and healthy checks are carried out regularly (minimum once a year) by registered engineers and that records of their visits are kept safe and in good order.

It is advisable that you as a landlord ask your estate agent to run a checklist and assessment on your property before you rent it. They may be able to help you in appointing registered engineers who can issue you with the health and safety certificates you need.

What Can You Do As a Landlord If Your Tenant Wants To Leave Early?

In an ideal world, all tenants would remain in their rented home until the end of their fixed term of tenancy. However, by their very nature, renters are not as predictable as that. Often choosing renting over buying as they perceive it to offer more flexibility, they are only a change of job or relationship status away from needing to move before they anticipated.

So what can landlords do if their tenant asks to leave early?house-wall-tenant-wants-to-leave-early

According to Gov.uk, the tenant is responsible for paying rent for the full term of their tenancy whether or not they wish to leave early. However, they can leave early without further liability for rent if there is a break clause in their Tenancy Agreement or if the landlord agrees to end the contract. If a tenant leaves the property before the end of the fixed term without giving notice of this, it is classed as abandonment and they should still be liable for rents due (although tracking them down to claim this may be an issue).

In the case of a break clause, the Tenancy Agreement should be clear on how much notice a tenant has to give. In most cases this is one month but you can set it to two months if you wish. It should also state when notice can be served from (e.g. after the first three months of the tenancy) and if there are any special procedures which need to be followed.

You cannot force a tenant to remain in the property, and as long as they are willing to pay rent for the remainder of the fixed term they can leave when they wish. In these instances, make sure you carry out any property checks before they leave so that if there is any damage to the property you can resolve this with them.

There is some confusion over whether a landlord can still claim rent from a leaving tenant for the full term of the tenancy if they are not actively looking for a new tenant. Some experts cite the case of Reichmann and Dunn v Gauntlett and Beveridge from 2006, from which a precedent can be drawn that a landlord does not have to ‘mitigate a tenant’s losses’ by trying to get a new tenant in as soon as possible.

However, this case related to a commercial property, and it is unclear whether the same precedent would stand in the event of a case being brought to the courts relating to a residential property.

Therefore, the safest option, and the best for all parties, would be to market the property to find a new tenant quickly. An unhappy tenant could cause you problems further down the line and potentially damage your reputation as an accommodating landlord. If you do decide to market the property, it is reasonable to expect the existing tenant to assist fully with viewings.

Another option is to ask the outgoing tenant to find a replacement – this saves you the hassle and expense of marketing the property, however you should make clear that you have final say over who takes over the tenancy, and do the appropriate checks on any candidate they find.

Ending a tenancy early is a troublesome but inevitable part of being a landlord, and you may find that the best course of action is to be accommodating, find a new tenant who is keen to live in your property, and allow your former tenant to move on.

Council Tax for Landlords Explained

It used to be that, in most cases, landlords could avoid paying Council Tax on their rental properties altogether. However, due to changes in recent years, there could be times when you are liable for Council Tax so it is important to make sure you know where you stand. Here is a summary of the rules around Council Tax and rental properties.

When the property is filled

Section 6(2) of the Local Government Finance Act 1992 shows that the liability for Council Tax falls on whoever is resident in the property. Therefore, tenants are responsible for paying Council Tax unless the owner of the property also lives in it. If there are no residents, liability falls on the owner.UK Council Tax for Landlords

Your residents may be eligible for discounts or exemptions from Council Tax, for instance if they are living alone in the property or if they are full time students, but it is up to the tenant to apply for these.

An exception to this is Houses of Multiple Occupation (HMOs) where individual rooms are let out and residents are on individual tenancies. In these cases, the landlord is responsible for paying the Council Tax. However, classification of what constitutes a HMO varies between councils, so if you are in any doubt, contact the council your rental property is under to clarify.

When the property is vacant

Landlords used to be able to claim Council Tax exemption for vacant properties for up to six months. This was very useful as it meant that no extra costs were incurred when there was a gap between tenancies. However, from 1st April 2013, the system changed so that individual councils could vary their approach to empty properties.

According to the Gov.uk website, landlords will usually have to pay council tax on their empty properties, although some councils do offer discounts or even full exemptions in some cases. This means that landlords need to contact the council their property is under to find out how much, if anything, they have to pay – which will be quite an undertaking for landlords with a portfolio of properties across different boroughs.

There are still some exemptions for empty properties – for instance, if you are carrying out major refurbishments to the property while it is vacant you can contact the council regarding this and they will send you a ‘completion date’ from which you will need to start paying Council Tax.

It is also worth noting that if a property has been vacant for 2 or more years, councils can now charge 50% extra Council Tax. This normally wouldn’t affect landlords, but it is important to bear in mind if you are thinking of purchasing a buy-to-let property which has been vacant for a long time as not all councils take a change of ownership into account. Therefore, you could end up paying 150% of the usual Council Tax bill until you get tenants in.

If you are at all unclear as to whether you need to pay Council Tax on your rental property, or how much you need to pay, it is always best to contact the appropriate council for guidance.