Buy-to-let landlords should consider rent guarantee insurance after the Renters’ Rights Act came into force on 1 May, Karis Insurance has said.
The real estate finance and insurance specialist said the legislation could lead to longer periods of rent default, with landlords having to wait longer before regaining possession of a property where tenants have fallen into arrears.
Rent guarantee insurance can provide cover for up to 12 months if a tenant stops paying rent, helping landlords maintain income until they are able to replace a defaulting tenant with a paying one.
Under the Renters’ Rights Act, evictions for rent arrears must go through the court system. Karis Insurance said landlords could face delays, despite the availability of an online court service for rent arrears repossessions.
The firm said tenants will now be able to build up three months of rent arrears before a landlord can begin the eviction process, up from two months previously.
Ravi Sejpal, director of insurance at Karis Insurance, said: “If landlords can’t recoup lost rental income, then that can quickly erode any returns they are making from that property.”
“Reviewing insurance now is not just sensible – it could prove essential once the new rules take effect.”
“It’s not clear how long a repossession will take under the new system so landlords can take out a Rent Guarantee Insurance providing them with the security of a 12-month indemnity period. It’s accepted that many other parts of the civil court system in the UK suffer from delays and backlogs.”
LEGAL COSTS
Karis Insurance said rent guarantee insurance can also include cover for legal expenses, including legal adviser costs where landlords need to pursue or defend claims relating to tenant eviction, mediation and rent arrears.
Sejpal said: “Legal disputes can quickly cost thousands, especially if cases drag on under the new Act. Without the right cover, landlords risk being substantially out pocket just to regain control of their own property.”
“At Karis Insurance, we help landlords get the right specialist cover in place fit for new complexities in the rental market. With Rent Guarantee Insurance typically costing £295 a year, it provides excellent value for money for landlords looking to mitigate the risk of renting in a changing legal landscape.”
