Should I sign letter to indemnify letting agents?

by Readers Question

3 years ago

Should I sign letter to indemnify letting agents?

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Should I sign letter to indemnify letting agents?

I am concerned about a letter received from our managing agent asking to indemnify them.

We recently instructed agents to manage one of our BTL houses and since then they have found us tenants and they moved in on the 6th of March. However we have now received a letter from the agents head office asking us to sign to indemnify against claims or costs as the one tenant ( from a couple) has no guarantor and that we would be unable to take out legal cover and rent guarantee as a consequence.

We of course have called the local agent office dealing with this and they have informed us (via email) that we are still covered for legal and rent guarantee and this will be shown on our monthly statement)

They have however said that we must sign the letter and return it.

My question is simple, should I sign the letter? What happens if we don’t, as its the agent that is dealing with this.

We were not informed that the one tenant had no guarantor ( as we have later found out she has no form referencing) and they have already been in the house for a month.

Any advice would be great.

Damienyes no



Comments

Chris Sheldon

3 years ago

Hi Damien,

Don't sign the letter just yet!

There are a few questions that i need to ask you to clarify your position on this matter:

1. Are the couple married
2. Are both tenants on the agreement
3. Do you know how much rent under the guarantee has been allocated to each tenant (see the policy documents)
4. Do you know how much the guarantor for the one tenant can cover in rent
5. Have you had sight of the insurance policy certificate(s)
6. Have you had sight of the references
7. Do you know if the rent guarantee is on the building or on the tenants
8. Is the underwriter DAS

I will be able to give you a clearer answer once i know the answers to these questions.

Many Thanks

Chris

Damien B

3 years ago

Reply to the comment left by "Chris Sheldon" at "14/04/2015 - 11:53":

Hi Chris,

Here are the answers I have at the moment..

They are not married,

They are both on the agreement,

The rent is fully allocated to the male who's only reference condition was that he must produce a copy of there previous tenancy agreement and proof of 6 months rent( produced but the previous landlord was a family member)

There are no gauarantor a mentioned as the male has passed the affordability reference test,

I have not had sight of the certificate,

I have a copy of the references,

I don't know if the guarantee is on the building or the tennents,

And the underwriter is Great Lakes Reinsurance,

Hope all this helps and any advice would be greatly appreciated.

Many thanks Damien

Chris Sheldon

3 years ago

Reply to the comment left by "Damien B" at "14/04/2015 - 22:13":

Hi Damien,

I can see no reason that the agent would require you to indemnify them because if the policy is on the building or the tenants then the male tenant meets the affordability criteria and the guarantor covers the rent for the other tenant.

One possibility is that they haven't received the appropriate documentation from the tenants prior to them moving in i.e. Photo id, proof of address etc.. This can invalidate an RGI policy and i would request proof that this has been obtained. Photo id is a requirement and if they cannot be linked to a previous address by the voters roll then proof of address will be required, this should show on the references.

Not that i wish to be disparaging to another agent but my only thought is that they have asked you to sign the letter to reduce there liability as the they haven't met the criteria for the policy and they are planning to take a risk in the hope that the tenants do not fall into arrears at which point they will have to pay for the arrears and legal out of there business account. Because they have said you will see this on your management statement, which i assume means that you will see the charge for RGI, i imagine although i couldn't be 100%, that this is the most likely scenario.

I would request sight of the RGI policy documents, which they may not agree to as the agreement is between the insurer and letting agent and therefore they have no legal obligation to present these to you.

I personally wouldn't sign the letter especially if you weren't made aware of this prior to the Tenant taking occupation as it has no benefit to you and you will not be receiving the full service you have requested relating to the RGI product.

I hope this helps and if you have any questions please do not hesitate to ask.

Chris

Damien B

3 years ago

Hi again Chris,

Looking again at the references I see that there is no confirmation of ID or address for the female as she has no photo ID, so what you say makes sense.

So today I thought I would give the head office where the letter came from a quick call to ask for an explanation for the letter, They were very vague and said I should speak to the local agent involved. I explained that I had done this and that they were very vague also.

They agreed to look into it and repeated that the insurance and rent guarantee was in place , so i asked them why I needed to sign the letter. they couldn't (wouldn't) answer and said I needed to talk to the local agent again.

Ironically the insurance policy came through the post today from Home and legacy dated 13th April.

The letter I had from the letting agent was dated 27th of March,

Now, I really cant seem to get to the truth.

As it happens we have another property that we let for which we were looking for a new letting agency so to hear from you may have helped in two ways.

Would you mind if I called you direct through letting supermarket to discuss both matters?

Thanks again Damien

Chris Sheldon

3 years ago

Reply to the comment left by "Damien B" at "15/04/2015 - 20:19":

Hi Damien,

Yes please feel free to contact either myself or Tony directly

Many Thanks

Chris

Puzzler

3 years ago

My agent self insures for RGI now but prior to this arrangement always copied me the policy details. Chris, I am not sure the agent is the policy holder as he acts on behalf of the landlord? If they are self insuring and they have installed the tenant then there is no reason for you to indemnify them. It sounds like the local and main offices need to get their story straight before you do anything. Please get agreement between them and proceed from there.

Chris Sheldon

3 years ago

Hi Puzzler

When you say self insure, what do you mean? it sounds like a very risky strategy, almost as if it is a warranty product which i definitely would avoid if it isnt backed by a large underwriter such as DAS. I have known RGI claims to run into 10's of thousands.

For all our policies and we have used several companies and it actually states on the policy certificate "This policy schedule covers letting agents only and is not to be issued to landlords"

Chris

Puzzler

3 years ago

That's interesting, it may have been issued to the agent but they always sent me a copy. They used to use Homelet. By self insure, I mean they take a premium and in the event of non-payment, they pay me. Both arrangements were for a maximum of twelve months so I don't know why it would go into many thousands unless no limit was placed (unusual for an insurance company). Homelet also capped it to the end of the policy year so if your tenant stopped paying after 10 months you only got one (one being the grace period). I don't know if the agent insures themselves, I think not as they pride themselves on good referencing and tenants.

Chris Sheldon

3 years ago

That is a very risky strategy and i hope for there sake that the pot they have for paying out in the event that a tenant goes into arrears is substantial.

I've never used homelet, so it may well be different with them. The policy you mentioned is a one month excess policy something we dont use. We always use nil excess

It also sounds as if it is a fixed term policy if a tenant goes into arrears our policy pays out whilst the tenant is in occupation including when a tenancy goes periodic, therefore it pays out until the tenant is evicted.

We've spent a substantial amount of time searching for the best RGI policy we can find and thankfully had some input into the terms of the product, my advice to all landlords who wish too use there own policies is to read what you are agreeing to very carefully as there are a lot of policies out there which would be very difficult to get to pay out.

I completely agree that i dont understand how they run into 10's of thousands but ive heard of many cases (thankfully where we haven't been managing the properties) where this has happened and even more where the landlords haven't had RGI in place, hence why nearly 75% of our landlords are using RGI now.


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