Landlord Insurance Problems and Referencing

Why Landlord Insurance is not what you have been told

This is a real bugbear of mine. I talk to many landlords who feel they would be protected from a tenant failing to pay them, due to landlord insurance policies that they have been sold by their previous agent.

However they fail to read the short print (and their agents fails to tell them) which would show them that the in most cases, insurance companies will only start to pay out after a minimum of two months after the arrears have been reported. Given you would only know there is a problem after the 1^st month rent has not been paid, you would end up having to pay the mortgage yourself for three months. You will also pay an excess on the policy!!

Why Credit Checks and Reference Checks Don’t Provide as much protection as you think

A lot of landlords believe that passing a credit check means your tenant is of good financial standing. Unfortunately that is not the case.

It simply means that they are not in such a bad financial standing to have caused anyone to get a CCJ against them. We all know people that are struggling to pay bills but yet pass credit checks to get a credit card. It's the same situation potentially.

If a tenant fails to pay a prior landlord, it is unlikely that a claim would have been registered against them to have been highlighted on their record. This is because a tenant eviction under a S21 gives no right to missed rent compensation, only re-possession of the property.

Also , even though a prior landlords’s reference should be taken it quite easy to have a friend lie for them.

An Employer’s reference can provide better protection if it states the amount that an employee earns as it allows you to see the tenants disposable income and hence affordability for the rent.

However in this modern age where many organisations are seeking to reduce any exposure to potential litigation, most organisational references simply state that the employees works for the company.

Better Protection for a Landlord

The best protection that I find is checking the tenants bank statements for the last three months and asking them to prove they can afford the rent.

You’ll find that most tenants have no problem with this and those that do are inevitably the ones that cannot prove their incomes. Do you want these tenants?