PPI Reduces Landlord Exposure to Rent Arrears says Burgess

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Landlord associations and mortgage firms are letting members and borrowers down by not giving them enough information on how to reduce their exposure to rental arrears says Payment Protection Insurance lobbyist Sara-Ann Burgess from specialist firm Burgesses.

Sara-Ann Burgess, MD Burgesses

This could relieve the pressure on landlords who are becoming increasingly alarmed about a build up of rental arrears - 74% of the NLA's 2500 monthly calls concern defaulting tenants and if rental payments are missed, this impacts on landlords' mortgage repayments.

Landlord associations and mortgage firms are letting members and borrowers down by not giving them enough information on how to reduce their exposure to rental arrears says Payment Protection Insurance lobbyist Sara-Ann Burgess from specialist firm Burgesses.

Although landlords are continuously invited to buy into a range of services that assess tenants' backgrounds or are given checklists of areas to scrutinise before handing over their keys, rental arrears and buy-to-let repossessions are increasing, indicating that no matter how many checks are undertaken, a tenant's financial situation can change dramatically.

According to the Council of Mortgage Lenders, 26,800 buy-to-let mortgages were three months or more in arrears at the end of last year, up from 7,500 in 2007 - a rise of 73%. Landlord repossessions doubled in 2008, reaching 4000 - up from 2000 the previous year.

Sara-Ann believes only PPI provides rental stability and says third-parties have been remiss in not reminding landlords of its importance for them and their tenants. She comments: "PPI can make a difference to arrears and repossession figures and would certainly allay the fears of the 71% of National Landlord Association members who expect rent arrears to increase in 2009.

"Prospective and existing tenants who appear low-risk today, because they're in employment, could lose their jobs in the next few months and fall into arrears. This is not scaremongering - it's a reality. However if landlords ensure their tenants have PPI they will receive rental payments , direct to their accounts, for up to a year if a salary is lost because of accident, sickness or unemployment."

Sara-Ann continues: "This could relieve the pressure on landlords who are becoming increasingly alarmed about a build up of rental arrears - 74% of the NLA's 2500 monthly calls concern defaulting tenants and if rental payments are missed, this impacts on landlords' mortgage repayments."

Landlords can purchase rent guarantee cover, but it usually covers six months of missed rental payments, whereas as rental PPI pays out for up to a year. Sara-Ann concludes: "PPI is more socially responsible as it's protecting the tenant as well as the landlord. No one wants to lose their family home and end up on the street because their circumstances change and PPI ensures this doesn't happen.

"Both sides benefit - there's peace of mind for the tenant, knowing payments will continue if a salary is lost and income stability for the landlord. I'm surprised more associations and mortgage firms aren't advising landlords to encourage tenants to take out PPI and pointing them in the direction of independent providers who offer this cover."

When standalone firm British Insurance launched rental PPI last September, it was welcomed by the NLA who said the product was long overdue and gave confidence to the rental sector.

The Policy covers up to £1500 per month rental payments or 50% gross monthly income and starts at £1.90 per month per £100 of monthly benefit. It offers back to day one payouts and one set premium rate, a choice of cover options and caters for people who voluntarily leave work to become carers for up to one year.    

Claimants can take advantage of free back to work assistance with telephone advice, a 'back to work' guide offering practical help and guidance on job seeking, CV preparation and interview techniques, plus access to a daily updated job vacancy database highlighting opportunities that are not necessarily advertised on a wider scale.

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Sara Ann Burgess
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