the pitfalls of the unpaid rent guarantee for landlords

To guard against unpaid rent, landlords can protect themselves by paying for insurance. But beware of the specificities of the unpaid rent guarantee (LGI)

The percentage of unpaid rents is approximately 1.5% each year for the entire rental stock. At the end of November, the National Observatory of rental arrears indicated that it had not observed any significant increase in arrears, even if we must remain vigilant in the inflationary context that France is currently experiencing.

To protect against payment incidents, there is the free Visale public guarantee, the success of which is growing. But this device is not suitable for all contracts since it is reserved in particular for 18-30 year olds and for an amount of the rent must not exceed a certain ceiling.

I don’t quibble for 25 30euros

For other files, landlords can also turn to the guarantee of unpaid rents (GLI), an insurance product that is especially favored by landlords whose accommodation is in rental management entrusted to a real estate professional.

This is the case, for example, of Philou75. I do not quibble for 25 to 30 euros, I pay insurance and in addition it does not cost me that since I deduct this amount from my rental income… I also pay the agencies to manage my property, I take care of almost nothing and I’m doing very well, he explains on the MoneyVox forum.

Landlords who manage their rental accommodation themselves are more reluctant to take out this insurance for several reasons. In effect, the rental law prohibits the owner of the premises from resorting to an accumulation of guarantees: he cannot at the same time request the guarantee of a deposit and take out unpaid rent insurance.

It’s one or the other. According to article 22-1 of law 89-462 on rental relations The suretyship cannot be requested, under penalty of nullity, by a lessor who has taken out insurance, or any other form of guarantee, guaranteeing the rental obligations of the tenant. tenant, except in the case of accommodation rented to a student or an apprentice. The deposit of guarantee is on the other hand authorized, within the meaning of the law, it is not legally a guarantee.

Beware of exclusions

The arbitration made by the lessors leans clearly in favor of the guarantee of family, friends or an organization whose immense advantage is free, whereas unpaid rent insurance is payable. Like any insurance contract, unpaid rent insurance includes exclusions, deductibles, guarantee limits… It is therefore imperative to carefully read all the clauses of the unpaid rent insurance contract.

Another major difficulty, not all insurers check upstream that the tenant selected by the lessor meets their solvency criteria: the verification is carried out a posteriori at the time when the unpaid occurs. Coverage was then refused, and the lessor discovered that his tenant did not meet the insurer’s criteria.

However, before taking out unpaid rent insurance, the lessor is not or very rarely informed of these criteria, a situation that is all the more detrimental as each insurer imposes its own: the latter requires, for example, that the tenant proof of an income equal to or greater than three times the amount of the annual rent. Another that he benefits from a CDI with several years of seniority…

Similarly, if the tenant has embellished his situation without your knowledge, the insurer will refuse coverage. Taking out unpaid rent insurance when the tenant is already in place is not always a good idea: the insurer can go through the lease contract you signed with the tenant, and if he discovers a clause badly drafted, or on the contrary a missing clause, refuse its guarantee.

A cost and a possible deduction well anticipate

The cost of unpaid rent insurance is between 2.50% and 5% of the annual amount of rent including charges. The insurers argue that the cost of this insurance is deductible from the taxable property income of the owner of the premises. A statement that is partly inaccurate: unpaid rent insurance premiums are deductible only if the lessor is subject to the real property income tax system.

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The deduction is not possible for the lessor whose rents come under the micro-land regime. There is obviously no question of passing on the unpaid rent insurance to the tenant: the law forbids it.

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In the event of unpaid rent and according to the contract signed, unpaid rent insurance can cover between twelve and thirty months’ rent with a ceiling between 2000 and 3500 euros per month.

The waiting period trap

Pay attention to the waiting period, which can be doubled. Thus, the contract can provide that if the claim, therefore the unpaid rent, occurs within a period of two twelve months following the subscription of the contract, the insurance does not compensate.

Even if the loss occurs a long time after the subscription of the contract, there may be a second waiting period which applies a bit like a deductible: the first months following the occurrence of unpaid bills are not covered. Carefully check this matter of waiting periods.

Unpaid rent insurance can also put you in charge of actions to be carried out within specific deadlines: for example, a follow-up no later than eight days following the first unpaid, a formal notice after such deadline, then an order to pay by bailiff justice…

It should also be noted that unpaid rent insurance can be accompanied by a legal protection guarantee covering the costs of litigation and proceedings up to a certain amount, around 5000 euros maximum.

Before choosing an unpaid rent guarantee, it is therefore better to compare the offers available on the market.

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