Landlords should take out rent protection

Landlords should consider taking out rent protection to insure themselves against non-paying tenants, one expert has advised.

According to Let Insurance Services, which provides this type of financial product, this type of cover is especially important at the moment given the economic situation, which is leading more people to have less cash.

The National Landlords Association (NLA) reported in December 2008 that 71 per cent of landlords expected rent arrears to increase in 2009.

It revealed that one per cent of landlords thought that rent arrears would decrease next year and 28 per cent felt that there would be no overall change.

Another 67 per cent of landlords said that they had experienced previous problems with rent arrears and 37 per cent of landlords said that they were experiencing difficulties with current tenants.

Michael Portman, managing director at Let Insurance Services, said: "The whole thing about insurance is that you only insure what you can't afford to lose.

"Some landlords who have lots of properties can afford to take the risks themselves but a person who is new to being a landlord and, for example, can't sell their house and is worrying that they have mortgage payments to pay out, then clearly rent protection is very important to them."

Rentright's Residential Rental Price Index (RRPI) recently found that the average monthly rent in the UK stood at £656 in November 2008, up from £527 in October 2008 but down from £836 in November 2007.

What is more, the Royal Institution of Chartered Surveyors (Rics) reported in its Residential Lettings Survey quarter three, from November 2008, that 56 per cent more surveyors reported a rise in new landlord instructions than a fall – up from 45 per cent in July.

It also found that 27 per cent more surveyors reported a rise in new tenant lettings than a fall.

Despite this rise in lettings, HomeLet reported in December 2008 that it paid out £2.7 million in rent guarantee claims in 2008 and said it expected this figure to rise in 2009.

However, these facts and figures have not been enough to spur some landlords into taking out rent insurance.

Mr Portman explained: "Some landlords don't bother because either they haven't been offered it by their letting agent or they don't know about it.

"Because it is such a niche and unusual insurance, general insurance brokers don't really offer it. It's really just letting agents."

The rent insurance expert stressed that landlords really should reconsider their stance on this as even the most seemingly reliable of renters can find themselves suddenly unable to pay.

"In central London there were various tenants who were working for Lehman Brothers and a year ago you would have thought that Lehman Brothers would have been a fantastic type of covenant," he said.

"A lot of people from Lehman Brothers lost their jobs and some of them haven't been able to pay their rent."