How does unpaid rent insurance work?
Summary
- What is the unpaid rent guarantee?
- What is unpaid rent?
- What are the eligibility requirements?
- What are the different types of compensation?
- How much does unpaid rent insurance cost?
- How to subscribe to unpaid rent insurance?
- How to cancel the unpaid rent insurance?
- Can a tenant take out unpaid rent insurance?
The biggest fear of a landlord is the failure to pay rents. This rental risk is reduced by subscribing to insurance, an unpaid rent guarantee or unpaid rent insurance.
What is the guarantee or unpaid rent insurance?
The Unpaid Rent Guarantee (GLI) is a device oriented towards owners to secure their rental property and prevent rental risks.
According to Article 7 of Law No. 89-462 of 6 July 1989, the tenant is obliged to pay the rent and recoverable charges, in addition to peacefully using the accommodation and ensuring the routine maintenance of the dwelling.
For the landlord, it is also possible to request a security deposit (combinable with unpaid rent insurance) or a guarantor (which excludes the possibility of subscribing to a GLI, unless the tenant is a student or apprentice).
In the event of unpaid rent or disaster, the landlord must:
According to article 22-1 of the law of 6 July 1989, the guarantee cannot be requested from the tenant if the landlord has taken out unpaid rent insurance (this does not apply if the accommodation is rented to a student or an apprentice).
According to Article 7 of Law No. 89-462 of 6 July 1989, the tenant is obliged to pay the rent and recoverable charges, in addition to peacefully using the accommodation and ensuring the routine maintenance of the dwelling.
For the landlord, it is also possible to request a security deposit (combinable with unpaid rent insurance) or a guarantor (which excludes the possibility of subscribing to a GLI, unless the tenant is a student or apprentice).
In the event of unpaid rent or disaster, the landlord must:
- Send a reminder letter to the tenant
- If no response is available within 15 days, send a formal notice
- Call on a judicial officer
- Contact the insurance company and file a home claim
According to article 22-1 of the law of 6 July 1989, the guarantee cannot be requested from the tenant if the landlord has taken out unpaid rent insurance (this does not apply if the accommodation is rented to a student or an apprentice).
What is unpaid rent?
Rent is considered unpaid when payment is not made on the date set out in the lease.
According to the Caisse d'Allocations Familiales, the rent is considered unpaid when the debt exceeds more than two months' rent excluding charges (before deduction of aid).
The causes of unpaid bills are numerous : unemployment, life transition, illness, over-indebtedness, etc., so it is sometimes difficult to pay your rent correctly.
The aim is to avoid the cancellation and termination of the rental agreement and the implementation of the eviction procedure.
What are the eligibility requirements?
- The tenant must earn more than three times the amount of rent, with stable income.
- For the self-employed, it is best to justify two or three years of activity with regular and stable income
- Solvency files must be studied without a guarantor (incompatible with a guarantor unless the tenant is a student).
Unpaid rent insurance concerns housing in main residence (not possible to subscribe for a business, a second home or student residence).
The main documents to be transmitted:
- Copy of both sides of an identity document
- Proof of professional situation (last 3 payslips for an employee, certificate of resources and last tax notice for a self-employed person)
- Proof of address
- Proof of income
- A RIB
- A certificate when the tenant receives housing benefits
If the tenant file is not strong enough or if the price of insurance is too high for the owner, the Visale guarantee is an alternative.
How much does unpaid rent insurance cost?
In general, the price of unpaid rent insurance represents between 2.5 and 5% of the annual rent.
The unpaid rent insurance premium depends on:
The unpaid rent insurance premium depends on:
- The amount of rent to be guaranteed (including charges)
- Options subscribed by the owner: degradation guarantee, management and verification of the lease file, etc.
How to subscribe to unpaid rent insurance?
Housing conditions
The main documents to be transmitted:
When the home insurance contract concerns a student, it will be necessary to provide salary certificates, a copy of the student card and a guarantor undertaking from a person justifying his solvency.
- The dwelling is the tenant's main residence: the unpaid rent guarantee is only valid for residential premises. It is not possible to subscribe for commercial premises, company housing, second homes and seasonal rentals
- Insurance companies set a maximum rent that they agree to insure (around €2,000 and €2,500).
The main documents to be transmitted:
- Copy of both sides of an identity document
- Proof of professional situation (last 3 payslips for an employee, certificate of resources and last tax notice for a self-employed person)
- Proof of address
- Proof of income
- A RIB
- A certificate when the tenant receives housing benefits
When the home insurance contract concerns a student, it will be necessary to provide salary certificates, a copy of the student card and a guarantor undertaking from a person justifying his solvency.
How to cancel the unpaid rent insurance?
It is not possible to use the Hamon law to terminate your unpaid rent insurance after the first year. The Châtel law applies.
- Annual termination : respecting the contractual notice period of 2 months. Otherwise, the unpaid rent insurance is tacitly renewed.
- Terminationof departure of tenants
- Termination at the departure of one of the roommates : in case of roommates and partial departure of the roommates, the guarantee continues, if the outgoing tenant is replaced by a solvent tenant.
- Termination in case of sale
Can a tenant take out unpaid rent insurance?
It is quite possible for a tenant to take out unpaid rent insurance. This is the Visal guarantee. The Visale guarantee compensates landlords in the event of unpaid rents and this device is free of charge.
What are the different types of compensation?
Unpaid rent insurance covers several risks:
- Unpaid rent. The insurance replaces the defaulting tenant and compensates the owner for unpaid sums.
- Rental degradation. This guarantee is not found in all contracts and consists in covering the owner of any damage caused by his tenant and whose cost is higher than the security deposit.
- Legal protection: defends the landlord in a dispute (apart from lawsuits for unpaid rent).
Ce qu’il faut retenir :
- The Unpaid Rent Guarantee (GLI) is a device oriented towards owners to secure their rental property and prevent rental risks.
- Rent is considered unpaid when payment is not made on the date set out in the lease.
- Unpaid rent insurance covers several risks: unpaid rents, rental degradation and legal protection
- In general, the price of unpaid rent insurance represents between 2.5 and 5% of the annual rent.
- It is quite possible for a tenant to take out unpaid rent insurance. This is the Visal guarantee.
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Posted on 31/08/2023 by
Andy LECUYER
