Thank you to everyone who joined our webinar "From a should-have to a must-have: Everything you need to know about Rent Guarantee Insurance". We enjoyed talking all things Rent Guarantee Insurance with Alan Boswell Group and our attendees. Fortunately, for those who couldn't make it, you can watch the full webinar below or alternatively read the transcript.
Watch the webinar to learn more about:
- What Rent Guarantee Insurance is
- How the market has changed in 2021
- Why Rent Guarantee Insurance is now more important than ever
- How to integrate Rent Guarantee Insurance into your sales process
- Our offer to you
To learn more about our Rent Guarantee Insurance Cover, please click here.
Curran McKay: Good morning everyone, and welcome to this webinar around rent guarantee insurance. My name is Curran McKay, I'm the commercial lead at RentProfile, and I'm joined by Adam Weedon-Luck. Adam, nice to have you join us this morning, would you like to introduce yourself.
Adam Weedon-Luck: Thank you Curran. As Curran said I'm Adam Weedon-Luck, I work with Alan Boswell insurance brokers. My role at Alan Boswell Group is to manage the day-to-day relationships with introducers, helping them promote landlord insurance and rent guarantee insurance. This is to help agents integrate those services into their customer journey. That helps them to enhance their service packages, and also to produce an additional income stream for their business as well.
Curran: This morning we're going to be talking about how rent guarantee (insurance), certainly over the last year, has moved from being a should-have to a must-have. So maybe Adam you could start by giving us a little introduction or overview about what rent guarantee insurance is.
Adam: Legal and rent guarantee cover has changed from being a nice-to-have policy to a must-have policy, and it's really for agents and landlords to protect themselves. The rent guarantee policy will provide letting agents and landlords with a safety net in the prospect that the tenant defaults on their rental obligations, and it provides that financial security so that they're not left having to pay the mortgages without that income stream coming in. It does more than that as well. A lot of people think that it's just the rent guarantee and landlords, but it also covers health and safety prosecutions, property legal disputes, any repair and renovation disputes as well, and also a bit of tax protection for the landlords when they take it out themselves.
Curran: Let's talk about the market and what's changed and what is changing as we go forward. Obviously things are a bit in flux right now, and we can touch on it a bit from the referencing side and what we're beginning to see in the market, but if you want to give a bit of an overview from your side and what you've seen Adam.
Adam: As mentioned, the world's been very different in the last 18 months, and this has really affected insurance in a big way. Rent guarantee (insurance) went from being a policy which not many landlords really wanted at the time, to a cover which every single agent is requesting from their landlord or insurance broker. With the changes in the world - things like the government eviction ban meaning that tenants couldn't be evicted for six months, and furlough - lots of tenants became at risk of not being able to pay their rent. This meant an uplift in the amount of claims reported and also the eviction timescale to get the tenants out, which meant every single claim was more expensive than it used to be.
As a result, insurers took stock, they pulled the covers up, some insurers changed the cover they were giving, and unfortunately all the prices rose as well. We have spent the last 18 months trying to re-evaluate the policy, and bring a new policy out to the market, so that the letting agents and landlords have access to the best policy possible. Things that have changed over the last 18 months - cover was restricted down to six months in many cases, but under our new policy which we just released in August, we've increased that back up to 15 months' worth of cover that you can get on a rent guarantee claim. We've introduced vacant possession back into the policy as well. Vacant possession is a cover where, if the tenant's been evicted after a rent guarantee claim, we'll continue to pay three months' worth of rent at 75% of the rental amount, while you're trying to get that property inhabited again. There's no excesses on the policy.
There used to be some minor excesses on some property legal disputes, but there's no excesses whatsoever now, and the claims reporting period has been extended up to 60 days, so we can accept more claims than we did before. We don't want to be kicking claims out, we want to give landlords and letting agents a chance to be able to make a claim. There's been a recent study (suggesting) about 400,000 renters in the UK are going to be in arrears this year, which really brings home to you just how liable everyone is. Someone's going to fall into arrears and it's going to affect somebody, so it's best to protect yourself.
Curran: Completely. We've seen the same over the last 18 months, possibly even longer, that things have been in an almost artificial buoyance. You talked about the eviction ban, and we've had to adapt our flows around things like whether someone's on furlough, or the job support scheme, and in ten days' time, the furlough scheme will end completely. And around one million people are still on furlough currently, and the real question that remains is whether or not those people are being artificially employed, and will they have jobs to go back to after this period. What we've also seen through our platform is a rise in the number of fraudulent claims by tenants - things like forging bank statements which we don't accept but other referencing companies do, and increasingly slipping through the net. Some of these aren't necessarily tenants (actively) trying to defraud or (carry out) criminal activity, but if there is some lying on their applications or stating that their jobs are more secure than they are, we're finding that as time goes on.
Things are very uncertain at the moment, and in terms of protecting your property and protecting your asset, there's never really been a better time to do it, or a more important time. So just going through those costs, and we've spoken about this before, obviously the main focus for a landlord is around the rent and the loss of that rental income, but actually what people might not necessarily know are the costs associated with evictions and so on. Could you touch upon that?
Adam: That's right, it's not just the missed rent that you're going to be liable for should a tenant default on the rent. There are things like issuing a section notice, which will be £100, a possession order online which is £883, and you're going to need a bailiff to enforce the possession order that you get from the court, which is another £350, so just as a minimum you're looking at around £1,300, just for the legal work and the court costs for getting a tenant evicted.
With the missed rent as well - which is about £1,000 per month for the average rent at the moment - with six months' worth of tenants not paying the rent and the legal costs associated with that, that's at least £7,500, and it can be a lot more, especially considering the high rents in the London market, and it's also worth noting that if you do this yourself and it doesn't go well, you might have to do it all over again.
For example if you've issued your section notice and there was something wrong with the tenancy agreement, or on the notice itself, the court will tell you to go back and re-issue it, meaning you'll be missing even more rent and spending even more on legal costs. It's important to get a solicitor involved, which will come under the legal and rent guarantee policy, so for £195 against those tens of thousands which you could lose out on, it really is a no brainer and you should be doing it.
As I mentioned as well, it's important to get your documents in order and to make sure that the section notices are issued correctly (along with) your ‘How to Rent’ guide. RentProfile is a really good product on this aspect as you've got a tenant onboarding system, which is useful as if you do this tenant onboarding then that will come straight over to us, which Curran will be able to explain a bit more about.
Curran: From both an insurance perspective but also a legal perspective, having all of the documentation and those pieces of compliance (is crucial). I believe that during COVID alone there were 40 new pieces of legislation that agents or landlords needed to comply with, so keeping up with these things - you mentioned the ‘How to Rent’ guide - our onboarding system automates that compliance from start to finish.
Right from the moment that we onboard that renter, we issue the ‘How to Rent’ guide, they agree agency terms, they're presented with a fully compliant set of referencing criteria (at) every part of this process - not even for example being able to progress to the signing of the agreement without that EPC in place, which we pull from the government's website and it's available for you. It's all about reducing that burden of admin and compliance, but making sure that if and when a claim needs to be made, the documentation is all in place, all there and available, and that's what onboarding helps to do in that process.
Adam: From our point of view, we'll have agents or landlords who say they've issued the ‘How to Rent’ guide, they've then gone to renew the tenancy agreement, and they haven't reissued the ‘How to Rent’ guide and it catches so many people out, so it is a really valuable tool.
Curran: So, looking at the purchasing criteria, obviously we partner with Alan Boswell Group and our tenant or guarantor referencing at low or medium-low risk with these criteria are acceptable, but if there's anything you want to add.
Adam: The RentProfile reference will be acceptable for you to be able to purchase the rent guarantee, provided it's on that low or medium-low risk. You may have tenants who are already in-situ, you wouldn't need to re-reference those tenants, as you can say they've paid their rent on time for the last 12 months - 'on time' refers to within 31 days of the due date - that would then be deemed as your acceptable reference if you're looking just to transfer some cases over. The RentProfile reference will make sure the tenants have got no CCJs or bankruptcies in the last three years, and they need to be clear for three years as well, so if they've had one say five years ago but they've only just settled it last week, it wouldn't be accepted as they need to be clear for three years.
They also need to have an identity check, which RentProfile can do, to provide proof of who they are, using passports, driving licences, or utility bills, along with an employer's reference to confirm that they're in employment, that it's a permanent employment, and that they're earning at least two and a half times the rental amount. We can use self-employment for this, we can use pensions, and we can also use benefits as well towards the two and a half times.
We don't accept student loans, that's one of the things we don't accept, but if the tenant can't pass the referencing, it's not the end of the world. We can always use a guarantor in place as well, and that guarantor would then just need to pass those checks, but they need to be earning three times the rental amount. When I refer to two and a half times and three times, some agents will have it as 30 times and 36 times, but it's exactly the same thing.
Curran: And all of those points you mentioned (are) covered in our referencing, so the advantage for agents and clients who need that peace of mind is that if you run a RentProfile reference, and that report comes back classed as low or medium-low risk, then it's going to be eligible for the rent guarantee. In terms of talking about the actual policy itself, what's included and what isn't and how it's purchased, if you could touch a bit on that.
Adam: We're pleased to say the price has come down from where we were in July, we're now down to £195, which includes the insurance premium tax. That's per property, or per tenancy if it's on a HMO. The policy has been increased, it used to be six months' worth of rental payments you'd receive, but you'll now receive 15 months' worth should the claim take that long. On top of the 15 months, that includes the three months' worth of vacant possession which I touched on, which is the period outside of when the tenant has been evicted from the property.
So it can be up to 18 months' worth of payments you're receiving. If it's a HMO, you need one per tenancy, but if you've got a HMO where they're all on the same tenancy agreement, we usually advise against taking this cover and take a legal expenses only (cover). This is just to do with the tenants needing to be two months in arrears on the policy for the claim to be valid, and two months is just two missed payments rather than two calendar months.
Curran: We've had a question come in asking can we set up cover mid-tenancy, which I think you touched on but it would be good to clarify again.
Adam: Yes we can do cover mid-tenancy. If the tenant's been in there for the last 12 months, then you'll just need their rental statement to show they've paid on time for the last 12 months, and that would be deemed as an acceptable reference.
If they've been in there less than 12 months, they would need to be re-referenced, just to confirm their affordability again. On the mid-tenancy ones, if they haven't had cover elsewhere, there is a 60 day exclusion period where you wouldn't be able to make a claim, so for any incident that happens in the first 60 days of this policy, none of that claim would be covered. The first incident would have to happen after day 61.
Curran: But in terms of everything else the policy remains the same?
Adam: Absolutely, yes everything stays the same.
Curran: One of the things that our clients have been grateful for over the last turbulent year and a half was that at no point did Alan Boswell Group pull the cover. Seeing the price drop back, whereas at the moment everything with inflation seems to be going the other way, and with the enhanced over, is refreshing to see. In terms of purchasing rent guarantee insurance, how would that work?
Adam: To purchase the rent guarantee, you can access (it) via your RentProfile platform, which will log you on to our agent platform. When you log in you'll be able to look after the policies you've got there, and you'll be able to renew policies or report claims, while you can also purchase your own policies. To purchase a policy as an agent, you'll need to be managing the property, and this needs to include rent collection, which gives you the insurable interest to be able to purchase cover. To purchase the policy, it's just a matter of entering the property address and the date that you're looking for the cover to start from, which is usually going to be the tenancy start date, or the date that your existing policy is up for renewal.
It takes about 15 to 30 seconds to upload this information, and we'll then confirm your cover via email, and we'll also include a contract of guarantee document. This is the document you can then pass to your landlord as proof of the service that you've just purchased. Regarding payment, we then invoice on the 15th of the following month for any policies you've purchased, and you can pay this by BACS or card, while we do have a direct debit facility as well, so you can spread the cost of the cover.
Curran: So really straightforward and also good for cashflow as well. Does the tenant need to be re-referenced at renewal?
Adam: The tenant will only need to be re-referenced at renewal should they have missed any rental payments during that year. That means they were later than those 31 days before the payment was paid, they would then need to be re-confirmed for the affordability and that they have no CCJs or bankruptcies.
If they can then pass that referencing, then they're absolutely fine to renew the policy. Regarding the referencing as well, if you do have a claim, there's no need to renew the policy.
No you don't (need to renew the policy if you have an ongoing claim). For example, if you make a claim at month 11, that policy will deal with the claim right through to eviction, and it's only at that time that you would need to renew a policy, should the tenant be evicted and if you get a new tenant into the property, so no you don't need to renew it if you've got an ongoing claim.
Curran: Does the policy cover for dilapidations?
Adam: There's an element of cover for dilapidations on the policy, this ties in with doing an inventory check on your property. You need to make sure you've done a check-in and a check-out on the property. It's not a requirement of the policy that you can't have the policy if you don't do it, it just means you wouldn't be able to claim for the dilapidations, and it also means that the last month's rent which is due will have to be paid by the deposit which you've taken on the policy.
Providing you've done that check-in and check-out, there's going to be a cover for dilapidations. It needs to be a minimum of £1,000, and that can't be made up of more than 75% in fees. It needs to have £1,000 worth of dilapidations, and it also needs to have a 51% chance to go to court to see that we're going to be able to recover the costs for you as well.
The policy doesn't require you to take a deposit. If you've got an insurance policy in lieu of a deposit, or you haven't taken a deposit at all, that's fine, you can still take the policy. We just ask that if you have received a cash deposit or BACS or something like that, that it is protected according to the law.
Curran: Within onboarding we can auto-register the tenancy deposit, so that ensures compliance. Would that mean if someone used a deposit alternative scheme, would they still be able to take out the rent guarantee insurance?
Adam: Yes that doesn't affect it, that's absolutely fine.
Curran: What do you consider as reducing chances of going to court, and can you not claim if dilapidations are less than £1,000?
Adam: The dilapidations do need to be a minimum of £1,000, and things that will reduce the chances of going to court can include, for instance, if your tenant has left the country, or if you've got no forwarding address in order to be able to chase them up, these kinds of things where we wouldn't be able to take them to court because we have no access to serve notice to them.
Curran: Adam, thank you very much for joining us, and thank you to everyone who has attended the webinar as well.
(This video was originally recorded in September 2021)