Renters Need Financial Safety Net as Much as Borrowers Says Burgess

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News that 71% of landlords expect more tenants to default on their rental payments next year comes as no surprise given there are so few payment protection products that cover the rent should a monthly income be lost due to unemployment.

Sara-Ann Burgess, MD Burgesses

It's important to put the issues surrounding rental arrears on the news agenda. Good landlords will want to keep good tenants and if the rent is interrupted, then it's likely the landlord will want to negotiate. It's vital channels of communication are kept open and where possible, a support mechanism is put in place.

News that 71% of landlords expect more tenants to default on their rental payments next year comes as no surprise given there are so few payment protection products that cover the rent should a monthly income be lost due to unemployment.

Payment Protection Insurance lobbyist, Sara-Ann Burgess from specialist firm Burgesses, say more should be done to support the ever-increasing number of people renting properties who are just as much at risk of losing their homes as those with mortgages.

She explains: "No one is immune from redundancy and whilst the news agenda is dominated by predictions of mortgage repossessions and measures to prevent this happening, little attention is being given to the millions of people renting properties, who could lose their homes far more quickly than borrowers as they do not have the luxury of a Government-backed two year payment moratorium or a range of PPI policies to rely on."

Research recently undertaken by The National Landlords Association reveal 71% of landlords expect rent arrears to increase during 2009, just one per cent believe arrears will decrease and 28% think there will be no change. It also showed 67% have experienced rent arrears and 37% currently have tenants with payment problems.

There are some three million households in the private rented sector and the NLA believes its research implications are significant. The NLA's Steve Hilton comments: "It's important to put the issues surrounding rental arrears on the news agenda. Good landlords will want to keep good tenants and if the rent is interrupted, then it's likely the landlord will want to negotiate. It's vital channels of communication are kept open and where possible, a support mechanism is put in place."

Sara-Ann believes renters could benefit from the same support mechanisms offered to borrowers and is urging PPI providers to launch more products for them, in the absence of any payment moratoriums.

She continues: "Whilst tenants may be lucky with sympathetic landlords and they could get some state support via Housing Allowances, it would be far more beneficial to have a PPI policy that pays the rent, immediately, in the event of unemployment, sickness or accident."
Very few firms have extended their portfolio from traditional mortgage payment protection products, however, independent PPI provider, British Insurance, launched a rental PPI Policy in September.

The Policy pays up to £1500 rent per month or 50% gross monthly income for up to one year, offers back to day one payouts, a choice of cover options and free back to work assistance which includes; telephone advice, a back to work guide offering practical help and tips on job seeking, CV preparation and interview techniques, plus access to a daily-updated job vacancy database.

Premiums start at £1.90 per £100 of monthly benefit for accident and sickness cover, £3.40 per £100 for the unemployment option and £3.90 per £100 for accident, sickness and unemployment. A tenant taking out unemployment cover, looking to receive £600 per month should redundancy occur, would pay a £20.40 monthly premium. If requested, the policy payment can go straight to the landlord.

Sara-Ann concludes: "People unable or unwilling to get a foot on the housing ladder are exposed to the same financial pressures as borrowers and it's not only tenants that suffer should they fall into arrears. Landlords lose an income as well, so it's a double whammy. When British Insurance launched its policy, the NLA said this type of product was well over-due and asked why tenants shouldn't be able to access the same protection products as owner-occupiers.

"I urge other providers to follow suit and become more socially responsible. Everyone should have equal access to a range of support mechanisms during this recession."

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