More rent guarantee insurance claims?

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More landlords could be making rent guarantee insurance claims once Universal Credit is introduced in place of current benefits.

Landlord Assist has highlighted that many buy-to-let insurance holders are unsure about renting to social tenants once UC comes in, as they are already having issues with payment under the current Local Housing Allowance scheme.

The government wants tenants to be responsible for passing on the housing part of their UC to their landlords in order to help them to manage their money better, with the property owner only getting paid directly if the tenant falls into serious arrears.

However, landlords who can’t wait to be automatically paid may need to call on their rent guarantee insurance to help them pay for the legal fees that could well be amassed by trying to ensure payment from the tenant.

Graham Kinnear is the Managing Director at Landlord Assist and he doesn’t believe that the government’s idea will do much to prevent those with landlord insurance worrying that they’ll be left out of pocket by social tenants not passing on the housing portion of their UC.

He notes that “there is enormous evidence which suggests that tenants in receipt of housing benefit do not pass this on to their landlords. With the cost of living increasing it is very easy for tenants to spend benefit money on other things rather than rent.”

And it’s not just landlords who don’t just want to be forced into submitting rent guarantee insurance claims – David Salusbury from the National Landlords Association (NLA) notes that “nine out of ten social housing tenants would like the security of knowing their housing benefit is paid directly their landlord,” adding that “it is vital that tenants are given this freedom of choice in order to encourage the adequate supply of affordable accommodation.”

Mr Kinnear adds that if payments aren’t made directly to landlords than “many will be tempted to leave the social housing in favour of the private market where tenants are more likely to have a regular income and a good credit record”.

Even so, according to online letting agency Upad, landlords are increasingly resorting to reference checks for private tenants so that they aren’t stung by rent arrears, which may cause them to make a rent guarantee insurance claim.

However, James Davis from Upad warns that some landlords may give a good reference “just to get rid of that person”, so he advises contacting the previous landlord too.

19th September 2011