Insurance, deposits and property redress schemes
Most rental property insurance policies, which cover buildings and contents
Most rental property insurance policies, which cover buildings and contents as well as the public (third party) liability of the landlord, require the occupier to be a direct tenant of the mortgagee and be on an AST or occupation contract. The landlord will therefore need the consent of the insurer in writing in order to rent to a none Housing Act tenant in a rent to rent arrangement. If insurance consent is forthcoming, it’s a good idea for the landlord owner to take out this cover directly with the insurance company, as opposed to trusting the rent to renter to do so, and building the cost into the rent or by way of a service charge.
In order to safeguard the landlord owner the rent to renter should be covered by professional indemnity (PI) insurance. This should be stipulated in the rent to rent agreement and the landlord owner should request to see a copy of the policy.
Insurance cover for rent to rent is a specialist area provided on an individual client basis. My advice to any landlord contemplating this is to make sure that your rent to renter tenant is covered by professional indemnity (PI) insurance.
When occupiers pay a deposit it is the responsibility of their landlord (the rent to renter) to protect it in one of the Government approved schemes, such as mydeposits, within 30 days and to serve the relevant documentation.
Complications arise if the rent to renter’s term ends and the occupier is still in the property. In this case, all responsibility for maintaining the tenancy falls back onto the landlord owner, and in the case of a deposit the occupier is entitled to its return (subject to deductions) when they leave.
The danger here is that if the rent to renter did not protect the deposit, the landlord owner is liable for returning it, regardless of the fact they never received it in the first place.
Provision should be made in the rent to rent agreement that any outstanding deposits be transferred to the owner landlord and re-protected, with new prescribed information being served on the tenant within 30 days.
In all of the above the rent to rent agreement must be crystal clear as to whose responsibility it is to comply, and this responsibility should be placed squarely on the shoulders of the rent to renter.
As a landlord owner you are vulnerable if your rent to renter fails to protect their tenants’ deposits. You could find yourself having to repay deposits in this situation, even if you never received them yourself. It’s therefore a good idea to make it a requirement that your rent to renter supplies you with proof of deposit protections.”
Given the propensity for issues requiring formal resolution with rent to rent, landlord bodies recommend that rent to renters join one of the voluntary property redress schemes. Ideally, this should be specified in the rent to rent agreement.
The Property Redress Scheme (PRS) offers an interactive way of sorting out formal resolution cases between landlords and tenants with the help of a professional mediator, a third expert who does not take sides. The mediator will take a professional and independent view, helping to resolve any issues in a fair way.
Rent to rent or guaranteed rent arrangements can be successful and they are a convenient way of taking the hassle out of letting property for landlord owners. However, this is dependent on dealing with a reliable rent to rent operator, with both parties being aware of the issues involved, and on setting the arrangement upon a proper legal footing. As a safeguard, it’s a really good idea to insist that the rent to renter joins a property redress scheme, just in case things do go wrong.”
as there are so many variables with a rent to rent situation, it isn’t cut and dried when issues requiring resolution arise. With that in mind, mediation can offer a great alternative to expensive court action, which can provide a mutually agreeable outcome for all.”
