Guarantor and Rent Protection

[adonaghy]

I have been letting out a house and managed it myself after some poor service from an agent. I’ve had great tenants with lots of help from this forum , thanks. Alas, they are moving on 😕and  I’d like to tighten up a few things like having a guarantor and rent insurance for new tenants. Not sure how I go about getting necessary documentation for a guarantor or the process but would appreciate any advice. Also are there any companies recommended for insuring rent payment? Do they vet the tenant? 

[Melboy]

I have been with many insurance companies over the 30 years I have been in the rental property business.

I too decided to tighten up on my landlord insurance a couple of years back and after a lot of research I went with Direct Line Landlords insurance as it offered everything I was looking for at an acceptable and reasonable price.

It's worth a look at but like all insurances cheapest is not always bestest especially what you can buy from the online companies like Compare the Market etc..

A Guarantor is essential these days imo. Preferably a property home owning one.

[Richlist]

A guarantor that is a home owner is not just preferable it's essential otherwise if you find yourself in a situation where you need to enforce the guarantor agreement there may be no money or assets available for you to claim.

[adonaghy]

Hi, thanks for replies. I will look in to Direct Line as I’ve had them for other personal policies. A home owning guarantor Will definately be a must. Will I be able to find binding documentation for this online as I’m managing property myself? 

[Richlist]

In my opinion you don't need to take rent guarantee insurance and a home owning guarantor.......just one or the other.......unless you are exceptionally risk adverse. The majority of landlords do not take both.

If you choose to go down the rent guarantee insurance route then the insurers will normally set the tenant selection criteria that you & they need to comply with. Therefore, there may be situations where a perfectly acceptable tenant applicant will fail that criteria.  You may then still choose to let the property to them and will insist on them providing a guarantor.

[adonaghy]

Thanks, helpful as always and much appreciated 

[Carryon Regardless]

I still use the Guarantor Deed that Grampa supplied many years ago,

that might be while some of us used another forum.

Many of my T's wouldn't satisfy the requirements of insurance so I don't look into any more, and if a T's status changes the insurancce may have no value anyway. Although insurance may be a considertion where a Guarantor is too remote and the T looks good.

For the £3 I carry out a Land Registry check on the G'tor. Firstly it checks on the accuracy of info given in the application. I can see what price paid and when, and additional charges that can be deduced as a bad debt action. Although I'm not able to see outstanding balances it's possible to work out if there will be equity to threaten. Be sure that's with the LR though, others will do the same for more dosh.

I Google map the location for an idea of their style.

I also look into social media to get an idea of the T where I can, it's better to be forewarned of an undesirable.

 

 

[Mortitia]

Doing your own checks re the Guarantor is vital.  Yes to home owner and Land Registry check.  The deed itself needs to be very specific to be defended in court and there is an argument that if a new tenancy agreement is issued or on the occasion of tenancy going periodic and new Deed of Guarantee should be entered into.

I use one by a senior advisor on another site which may well be the one CR is referring to.  

[Grampa]

In an ideal world you should get the guarantor to re-sign upon every renewal but the trouble with guarantors a lot of the time they are out of the area or they fall out with the tenants or later read up on the responsibilities and liability they have potentially given themselves. 

But having an agreement/deed that potentially has no end date (because it covers renewals and periodic)  could give a a cute solicitor/Shelter rep an argument to get it invalidated at a court hearing. 

The one we use get around  that "get out/end date" argument by saying they can be released if a suitable replacement is found. Not as tight legally as them resigning every time but a good compromise.  

[Richlist]

A guarantor is way down the list of my priorities. My list is as follows:

1. A tenant that can tick all the boxes, meets all of my requirements, doesn't leave me with any doubts or questions, has impeccable references, works preferably in a profession, doesn't mean I'm taking on additional risk and very probably doesnt need rent guarantee insurance or a guarantor. These tenants are out there......I've been letting to them for 20 years.

2. Take a deposit.

3. My preference is RGI not a guarantor. Insurance is clean, easy, less labour intensive and puts all the risk onto the insurer.

4. If a tenant cannot tick all the boxes and doesn't qualify for RGI and I still want to let to them, then and only then will I ask for guarantor.

A guarantor ......finding, administering, checking, signing, keeping on board etc etc, just seems like such a lot of really unnecessary work when there is an alternative......I give it a miss generally.

[adonaghy]

Thanks again all for your valuable advice. Tenants can’t move in to their new home til December so im going to decorate  over Xmas, then look for tenants in new year . Would rather wait a few weeks and select new tenant with care. My building insurance was only recently renewed but I was able to cancel as I discovered for only a very small amount more I could have rent guarantee insurance and extra legal cover with Directline. Will take my time and use the advice given to choose my tenants wisely.