Whats the point in insurance?

November 2, 2015 by Rob Kahl

Whats the point in insurance?

It is sometimes difficult to not tar everybody with the same brush when it comes to tenants. 99% of tenants are absolutely fantastic, looking after properties perfectly and not missing a beat when it comes to paying. The other 1% though can be extremely difficult and as a lettings agent they can take up the majority of our time.

I personally have seen both sides. I am lucky enough to own an investment flat in Leigh which I rent out. I have owned it for about 10 years and actually bought the property with the sitting tenant who is still living there. She has never once missed a payment and I have only ever been in to the flat myself twice; once to view the property when I bought it and the second time when I asked the tenant to sign our original contract. It does work both ways though, if she does ever call with an issue I always make sure that a tradesman is sent round as soon as possible to try and resolve any situation but if any of you are landlords you will know the feeling of dread that you get when your mobile rings and it is your tenant or letting agent!

The other situation was not quite so pleasurable. My wife owned a flat in Chelmsford and when we moved in together we decided to rent it out rather than sell it. Everything was fine, although we had a couple of void periods when tenants changed, but overall it ticked over well. The last tenant we had seemed lovely. She was a young girl on her own with a son who was helped out by her parents and for a couple of years everything was fine.

We then got a call from her saying she was going to have to leave as she just couldn’t afford to live there any more and was applying to the council to be housed. I must admit we were a bit naïve and she certainly was, she gave us notice and we got a date of when she was going to move out and due to our circumstances we decided to sell the flat. We put it on the market, got lots of interest and secured a buyer pretty quickly. Then the spanner was put in to the works.

The tenant trotted on down to council office, told them of her situation and asked when she could move in to her new house. I think she expected for them to have a stock of little starter type houses ready for her to move into and for her to have her pick of which one she fancied. As you can imagine it didn’t quite work out like that. The council would not even entertain her application until she had been legally evicted from her current property.

As she had already given us notice we naively expected her to move out on the agreed date but this now meant that she couldn’t move and had to stay put. She explained the situation to us and we were quite understanding. It seemed that the system the council used to house people was ridiculous and extremely stressful for everyone concerned and so we let her stay there until it was resolved and luckily for us she kept on paying (apparently according to the council she didn’t have to!). The buyer we had though was not prepared to wait so that fell through and we were back to square one.

The next step for us was to go through the eviction process. In this case I have to admit that my wife was right and she was well within her rights to say 'I told you so' (and she did). Against my wishes (maybe I am just an old hippy and too trusting, I am sure it would be fine) when we originally started renting the property my wife took out landlords rent guarantee insurance which included legal cover. In our scenario then it was worth its weight in gold.

We had to pay to take the tenant to court to evict her which obviously was a formality because she actually wanted to go and then pay again for bailiffs to be present at the point of eviction to make sure that she left. We didn’t have to do a great deal ourselves or be present at court or anything and everybody we spoke to was well aware of the hoops that had to be jumped through to get the tenant the house she wanted.

Even on the day of the eviction she still hadn’t been guaranteed a property and had to go to the council offices with her suitcases to plead her case. Hopefully they found her something nice, but I fear it was probably something more like a B&B to put her in temporarily until a house or flat came up.

There is a moral to this story and obviously it is going to cost you money. The reason that my story springs to mind again, coming back to me like a bad smell, is that we are currently going through a very similar situation with a landlord and tenant in the office. Unfortunately the landlord decided against the insurance and as such has to pay for the court appearance and bailiffs and his tenant is not as sweet or naïve as ours was (or more likely she knows exactly how to work the system) and she is not paying rent until she is legally evicted. To date the landlord is out of pocket by about £7,000 and counting. As you can imagine it is leaving a bit of a sour taste in his mouth and he is quickly losing face in human nature, I don’t think it is the right time for me to say that he should have taken the rent guarantee insurance.

If you are a landlord and you haven’t got any insurance please, please give us a call for your own sake. It might be that your tenant has been there for years and is no problem or even a friend now but their circumstances could change at any moment and could you keep up with the mortgage payments on your investment property as well as your own family home?

This article is by Rob @ Scott & Stapleton 
http://www.leigh-on-sea.com/scott-stapleton.html