Landlord? Insurance could save your bacon

Private Property South Africa
Lea Jacobs

Although landlords may believe that they are on their own and that dealing with a rogue tenant is just part and parcel of renting out a property, there are ways for them to protect their investment and rental income.

It seems that no matter what lengths landlords take to ensure that they rent out to good tenants, who not only pay their rent on time, but also maintain the home to an acceptable standard, bad tenants still manage to slip through the cracks. The law has become far more lenient on erring tenants, and landlords often have to fork out large sums of money if they want to evict someone who does not pay rent.

Tenants’ rights

More and more tenants are becoming aware of their rights and unfortunately, there are those who will do anything to milk the situation for all it is worth. Recent posts on a social media page highlight this, and the general advice offered to an individual who had not paid rent and was being threatened with eviction, was to ignore the landlord and stay put until the law took its course.

But, the wheels of justice turn pretty slowly in this country and it can take months to evict a person who refuses to pay for the roof over their heads. So what happens to the landlords, particularly those who rely on rental payments to pay their bonds, during this time?

But the bond must still be paid

It would be fair to say that the lack of payment coming in will be catastrophic to most landlords. The bond still has to be paid, regardless of whether or not the tenant has paid. Banks, understandably, don’t give a hoot as to how the bond gets paid every month: they simply want their money.

Renting out property to a virtual stranger is always going to carry an element of risk and it is highly advisable for any landlord to take out some form of rental insurance – Private Property has a great product called MiRent. Although the benefits of these types of policies vary, they do cover the rent when a tenant fails to pay.

Insurance products

The insurers generally operate in two ways: they either collect the rent on the landlord’s behalf and pay out immediately if the tenant defaults or, in the case where the landlord collects the rent, will, upon notification from the landlord, reimburse the amount after a certain time period. This period varies from 48 hours to 30 days depending on the insurance company concerned.

The cost of the premium is linked to a percentage of the rental being charged and policies usually limit the cover for a specific number of months. However, there are companies who cover the landlord for a certain amount and will continue to pay until that amount has been claimed.

The insurers may also put a cap on the monthly rental they are willing to cover, although this amount is generally high. In many cases, an insurance company won’t be willing to enter into an agreement if the rental is below a certain amount. Some insurers insist on vetting the tenant themselves before they will provide cover. These checks will include looking at a tenant’s credit record, checking the tenant’s bank statements and contacting their employer.

Good news

Perhaps the best news of all is that policies of this nature generally cover the costs associated with evicting a tenant. Legal costs are high and given that landlords are already out of pocket by the time they decide to evict a tenant, the additional costs can be crippling.

Times are tough for many and unfortunately, given the laws governing rental properties, landlords often run a gauntlet when it comes to finding a responsible person who understands that rent has to be paid every month. Many tenants appear to have adopted a philosophy of entitlement and landlords need to protect themselves from this sort of behaviour. And until the law changes, which is unlikely to be any time soon, landlords have to shield themselves from those who choose to use the slow legal process to their advantage.

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