Landlords and agents are navigating a changed rental market, particularly without the option of large upfront rent payments. This shift, alongside the Renters' Rights Act, means new approaches are needed to mitigate risk, with protecting rental income being as crucial as protecting the property itself.
Two primary options for landlords are rent protection insurance and professional rent guarantor services. Rent protection insurance is bought by the landlord to cover lost rental income if a tenant defaults, typically for a limited period. These policies may also include legal expenses, but the tenant is not part of the contract.
Conversely, a professional rent guarantor service involves a third party promising to pay the rent if the tenant is unable to, in exchange for a fee paid by the tenant. This service can help tenants who might not otherwise meet income or referencing criteria, such as students or freelance workers, by unlocking tenancies more quickly.
It is important for landlords and tenants to understand the differences between these products, as some insurance products may be described as guarantees, and some guarantor services may function more like insurance. Insurance is a regulated activity in the UK, requiring providers to be authorised by the Prudential Regulation Authority and Financial Conduct Authority.