A specialist insurance provider has reminded landlords and letting agents of the pitfalls associated with rent guarantee insurance.
Cover4LetProperty suggests that squeezed profits and legislative changes have encouraged more landlords to consider rent guarantee insurance to protect themselves against arrears.
One of the firm's directors, Richard Burgess, says that many landlords do not realise that they are required to obtain one Credit Agency Reference and at least one satisfactory written character reference for each tenant for a future rent guarantee claim to be valid.
"It is this misunderstanding that gives rent guarantee insurance a bad reputation," says Burgess.
"It is every landlord’s nightmare – a tenant has defaulted on their rent or has absconded, and the cost of taking the necessary legal action to recover that lost rent is typically time consuming and very expensive."
“Even if you win your case against the tenant, overall you could still be out of pocket after paying legal fees. It’s a hopeless situation – unless you have rent guarantee insurance," he says.
"Make sure you build in the necessary steps each time you take on a new tenant so your rent guarantee insurance will pay out in the event it needs to,” urges Burgess.