What protections against unpaid rent?
During a real estate investment, an owner will be extremely vigilant to the quality of its tenant and its reliability. Indeed, a solvent and serious tenant will be a pledge of payment of rent, and thus of return for the owner. In case of unpaid rent, the profitability of the real estate investment can be strongly degraded, and some situations may even be critical in cases where the owner has taken out a loan to finance his acquisition, and where he has no cash aside to mitigate financial contingencies.
The deposit is an important element
A tenant may, in many cases, have difficulty paying their monthly rent and their share of rental charges. Indeed, a period of precarious work or personal problems may, for example, prevent a tenant from paying temporarily or permanently rent. The owner who finds himself in this situation will have the choice to grant payment deadlines or claim the sums immediately.
In this case, having taken a deposit allows the owner to give himself more choice in dealing with the event. If the bond subscribed by the guarantor is a simple deposit, the owner must first try to recover the money from the tenant by launching, for example, legal proceedings. Once the legal proceedings have been unsuccessful, the owner can turn against the guarantor by claiming all the sums due, including costs incurred for the legal proceedings.
In the case where the guarantor's surety bond is a joint suretyship, the landlord will be able to turn directly against the guarantor, even without launching a lawsuit against the lessee. The surety bond is therefore a very strong guarantee for the owner to guard against unpaid rent. In order for the latter to be effective in addition to its deterrent effect it has on the tenant, it is essential for the owner to check the solvency of the guarantor to be certain that the latter has sufficient financial space within reach of his engagement.
Other solutions to guard against unpaid bills
In addition to the joint guarantee, which is still one of the most effective solutions to guard against unpaid rent, other solutions exist and are also very relevant. In fact, private insurers have developed another method called the unpaid rent guarantee, which replaces the tenant in the event of non-payment of rents. This method, more commonly known by its acronyms GLI, is an option increasingly underwritten because it limits the risk of real estate investment while calculating a profitability known in advance.
In order to subscribe to a GLI, the tenant must meet the conditions of resources set by the insurer that allow him to assess his risk. These generally stipulate that the tenant's net income must be at least 2.7 times higher than the monthly rent plus rental charges in the case where the tenant is on a permanent contract. If he is on a fixed-term or temporary contract, his net income must be at least 3 times higher than rent + expenses in order to be eligible for the GLI. If it is a student, insurance companies generally agree to guarantee the various unpaid rents over the period insured, provided that a joint surety covers the rental period. The amount of this GLI is generally between 3 and 4% of the amount of rents and annual charges.
In addition, the tenant who is in certain very specific situations can also request a guarantee of state, the guarantee VISALE which will act as a guarantor in case of default of payment. The owner who accepts this guarantee will not be able to protect himself by asking for another type of deposit. It is up to the tenant to institute the file, and then, to the owner to make the decision to accept the VISALE guarantee on behalf of his tenant.