We are now in a completely different operating environment

by Dr Rosalind Beck

10:09 AM, 28th October 2020
About 4 weeks ago

We are now in a completely different operating environment

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We are now in a completely different operating environment

In the past, if someone was in a reasonable job, I was willing to risk taking them on without a guarantor. In fact, it seemed rude to ask a professional in their 30s or 40s for one. The worst thing that could happen would be me losing about 6 months rent – which I may or may not have been able to somehow claw back later.

We are now in a completely different operating environment. I now prefer to let a property remain vacant even for a month or two if necessary, in order to wait for the least risky tenant with a homeowner guarantor. Far better to lose one or two months’ rent now than run the risk of losing 2 years or more rent if the tenant decides not to pay the rent.

Some prospective tenants are initially annoyed when they are asked for one. One wrote to me: ‘a guarantor for a £500 house?’ Others say ‘I am a mature professional. I don’t need a guarantor.’ But if I get no rent on the £500 house for 2 years I am down £12,000, not to mention the legal fees and stress. JUSTICE FOR LANDLORDS! – Property118  So, yes, guarantor, please.

I also find, however, that most prospective tenants are quite understanding about it, once it is explained to them, as I did to one today: ‘Unfortunately, due to recent Government legislation which makes it very difficult to evict any tenant who decides not to pay the rent, we have to have a guarantor as a safety net.’  The single mother of two girls said ‘yes, I understand completely.’

Just like other Government legislation supposedly to ‘protect renters,’ this is having the diametric opposite result and is awful for would-be decent tenants, whilst the rogues are protected.  When will the Government realise that all their interfering is creating havoc and misery for tenants as well as landlords?


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Comments

John McKay

10:26 AM, 28th October 2020
About 4 weeks ago

Spot on Ros.

I suspect it'll be even harder for many to come up with a guarantor too as some, perhaps many, will have lost their jobs.

Bill O'Dell

11:41 AM, 28th October 2020
About 4 weeks ago

I completely agree Ros.
This is what makes the student accommodation market so appealing. Never (ok rarely) a problem getting a guarantee, tenants leave at the end of their lease and there is a steady supply of new ones.
Current market maybe less predictable going forwards, until a vaccination readily available that works, but the transient nature of students makes it easier to plan. Of course the downside is it is not a hands off investment, in fact you need to engage regularly, but in 12 years I have never had an unplanned void, bad debt or house damaged other than through normal wear and tear.

psquared

11:42 AM, 28th October 2020
About 4 weeks ago

I have exactly the same problem. I now try to purchase rent protect insurance but it does depend on them passing the reference checks.
I’ve turned down 7 people who wanted to rent because they were not able to pass the checks.
Normally I would have accepted the risk on 4 of them but like other I cant afford to rent to someone not knowing how long I may go without rent. How do you get the government to understand the chaos and upset they are causing? I rent 18 properties with over 60 people being housed in high standard accommodation. But within the next 2-3 years I will have a lot less rooms as I’ve seen the writing on the wall. I don’t understand the reasoning but without a doubt the powers that be are deliberately forcing small landlords from the market.
I really fear for people truing to rent in the future because it will cost more, be harder to rent and a lot less availability.

Robert Mellors

11:42 AM, 28th October 2020
About 4 weeks ago

Any landlord of ASTs would be certifiably insane (maybe too strong a word?) to accept a tenant without at least one home owning RENT AND DAMAGE guarantor, in the current anti-landlord climate, where there is so much regulation that landlords can easily make a mistake on the paperwork, 6 months notice is required, courts are either shut or have a such a huge backlog that new cases may take 12 - 18 months to be heard, where UC is not paid direct to landlords upon request (instead of having to jump through hoops for this), where bailiffs are refusing to enforce the court judgements (in Tier 3 areas), and where there is little chance of effective debt recovery from the tenant. I think landlords would be wise to get one or more, rent and damage guarantors for every new letting.

Prospective tenants would be well advised to ensure they have multiple rent guarantors available to them when applying for a tenancy, as that will give them the best chance of being offered the tenancy they want.

It is very difficult for bad tenants to get rent/damage guarantors, so to some extent it also weeds out the bad tenants before the landlord is stuck with them.
Unfortunately, some good tenants may also be unable to get rent guarantors, e.g. they have no home owning relatives, so this is where the likes of Shelter and local councils should step in and act as rent and damage guarantors (but so far they always refuse to do this).

MoodyMolls

11:46 AM, 28th October 2020
About 4 weeks ago

Yes I am asking for guarantors going forward as others have said we now can't afford not to.

Ann Shaw

11:54 AM, 28th October 2020
About 4 weeks ago

Couldn't agree more!! Plus RGI Insurance also. I use Alan Boswell for this and they are fab and extremely reasonable. I've been able to insure all my tenants with RGI even through this pandemic. You're spot on though Dr Ros, Guarantors are a must in these awful times for Landlords, too!

moneymanager

13:55 PM, 28th October 2020
About 4 weeks ago

From Openrent's website re RGI

"Unfortunately, in the light of government plans to suspend evictions during the COVID-19 Coronavirus outbreak, our insurance providers have told us they need to suspend sales of rent guarantee products. We are very sorry for any inconvenience caused and are working urgently with our insurance partners to resolve the situation."

As to Guaranators, aren't they only as good as their liquidity and co-operation if called upon?

Sunrise

14:05 PM, 28th October 2020
About 4 weeks ago

As I understand it, a guarantor can give a month's notice after the fixed term, or if it goes to a periodic tenancy. So you then have to either evict the tenant, take the risk or issue a new tenancy agreement with a new guarantor.

DALE ROBERTS

14:12 PM, 28th October 2020
About 4 weeks ago

I thought you would all like the response I received from a lettings agent today when I re-iterated my standpoint that I would only accept a tenant if they passed the criteria for rental insurance AND provided a guarantor :
"With regards to a guarantor, if tenants pass references on their own it’s a bit unreasonable to ask for them to also provide a guarantor."

Robert Mellors

14:18 PM, 28th October 2020
About 4 weeks ago

Reply to the comment left by DALE ROBERTS at 28/10/2020 - 14:12
You are the customer and can stipulate whatever you want, and the letting agent should follow your instructions. However, if that is their attitude then I would conclude that they are not very on the ball in relation to the current risks of letting a property without a guarantor, and you may wish to consider finding a letting agent that actually understands the current risks faced by landlords?

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