The Government is drafting emergency legislation to suspend evictions, preventing social and private landlords from evicting their tenants. The new legislation, if passed, will bar landlords in the private and social housing sector, from evicting tenants, for at least three months.
Eviction ban – Confusion over Rent Guarantee
Insurance brokers, due to the coronavirus crisis, are refusing to offer rent guarantee insurance to landlords.
Some rent guarantee policies become activate, only after, a tenant is in the process of being evicted.
Landlords with defaulting tenants have some financial relief through the three-month mortgage payment holiday. This was recently announced on the 17 of March. The mortgage holiday has been extended, to cover landlords too.
Some landlords are concerned, if their insurance policies are going to be valid, through the Coronavirus period. Many are wondering, if they will be able to call on their insurance policy, if they need to, because of the pending 3-month eviction ban?
Direct Line Landlord Insurance
Members of the British Landlords Association, who have Direct Line rent guarantee policies, have reported they are unable to contact the insurer. Members have complained, their telephones are continuously engaged.
The Direct Line website reads: “Please don’t phone unless it’s absolutely necessary”.
Direct Line is one of the largest landlord insurance companies in the UK. They provide rent guarantee insurance to landlords.
One of the marketing slogans, direct line use is: “We’ll provide cover for any unpaid rent if you have to repossess your property. If your tenants can’t pay, we will”. Landlords very much hope insurers will pay out any rent losses, under the policies they hold.
Generally, the rent guarantee insurance works something like:
- The tenant has not paid rent, for at least, one month.
- The landlord has instigated possession proceedings by serving a section 8, and or a section 21 notice, on the tenant.
Landlords face a confusing situation; they must serve a section 8 and or a section 21 notice on their tenant as per there insurance policy. But upon the expiry of the notice, the next step is to issue possession proceeding through the county court. The problem is county courts are already declining to accept possession claims, so how do landlords trigger the rent guarantee policy to payout?.
Not all rent guarantee policies insist on landlords issuing a possession claim, a notice for some may be sufficient. Each insurer terms and conditions, including inclusions and exclusions, vary. So read your rent guarantee insurance policy, thoroughly.
Ban from issuing possession proceedings
Landlords will soon be barred from issuing a possession claim, because of the pending eviction ban. This is an essential move to prevent the spread of the Coronavirus. Most county courts are not accepting possession claims, and pending bailiff appointments have been cancelled, by some courts too.
Direct Line has issued an official statement: “Regarding claiming for lost rent if a tenant stops paying: the actions of the landlord will vary depending on the circumstances that they are faced with and the circumstances facing the tenant. Depending on those conditions, it is down to the landlord to decide whether they wish to commence the process of evicting the tenant and claiming under our rent guarantee cover”.
“Landlords who have selected our rent guarantee cover add on can make a claim where the tenant remains in the property and has not paid rent for 30 days, and the relevant Section 21 or Section 8 notice has been correctly served on the tenant”.
Many landlords may need to call on their rent guarantee insurance. We will have to wait and see how things progress between the insurer and the insured.
Rent arrears payment plan
The alternative for some landlords is not to claim on their insurance. Landlords may instead, try to agree on a rent arrears payment plan, with their tenant.
The British Landlords Association contacted: John Lewis, Aviva, LV, Emerald Life, Direct Line and Debenhams, for their comments regarding the rent guarantee and their other insurance products.
They were not available or declined to make any comments.
Wedding costs and Income protection insurance
Rent guarantee is not the only uncertainty; for the wider public, insurers are indicating, they may not (under some circumstances) cover existing income protection and wedding insurance policies.
John Lewis said in a statement: “The current UK government position is that … weddings are still permitted to take place. So, if your wedding venue is still prepared to hold your wedding and you chose to cancel, then this would not be covered.”
Source: British Landlords Association
Author: Marc Attwater
Date: 21st of March 2020