In France, it is compulsory for many property owners to take out landlord insurance to provide cover a missed rental payments by all the tenants. This landlord insurance distribution, called the guarantee of unpaid rents (GLI), is intended to protect property owners in the event that the tenant(s) fail to pay one month's rent. In this article, we will explain in detail how the GLI works in France.
What is the guarantee for not paid rent (GLI)?
GLI is an acronym used for Garantie des loyers impayés. It is a landlord rent protection insurance policy that landlords take out to protect themselves against failed rent payments and late rental payments by reliable tenants; it can also cover damage caused by negligence or force majeure events such as fire or flooding... But even the best tenants may have hard times and financial difficulties and be unable to pay the rent, a utility bill and gain an eviction notice.
A guarantee for unpaid monthly rental amount is a guarantee that the rent will be paid. It is a guarantee that you can give to your landlord to make sure that you pay the rent. This is not to be confused with the security deposit that tenants pay when they move in.
If you do not pay the rent, the guarantee can be used to cover the rent. Guarantees for unpaid rental are usually provided, authorised and regulated by the financial conduct authority, landord insurance companies or government agencies. They can be a clause in the lease or a separate tenancy agreement. Rent guarantees can help landlords to feel more secure in letting their renting property to prospective tenants and landlords can help tenants to obtain accommodation in an area where they would otherwise not be able to afford it.
In France, rent guarantees are mandatory for all new leases signed after 1 July 2009. There are certain types of guarantee for unpaid rent, but they all aim to protect the landlord in the event of missed rent by the tenant types. The most common guarantee is a bank guarantee, but there are also private insurance and public guarantees. The guarantee for unpaid rent arrears is an important tool to provide security for landlords and to enable tenants to access affordable housing.
How does the guarantee for unpaid rental work?
Under French law, all landlords must take out landlord rent guarantee insurance or tenant default insurance to cover the risk of unpaid rental from the tenant(s). This renter guarantor insurance takes effect from the date the lease is signed and only covers late rent arrears and charges during the term of the lease. If you have more than one rented property, you can take out a multi-risk home rent guarantee policy that will cover all your rented properties.
There are different ways for a landlord to take out a GLI: either directly with a landlord rent guarantee insurance company, through an estate letting agent or via a public body such as the Caisse des Dépôts et Consignations (CDC). In all cases, it is important to compare landlord insurance offers before taking out rent protection insurance, as rates can vary considerably from one insurer to another.
Some rent protection insurance companies also offer optional extensions of cover, such as covering the legal costs of litigation or compensation for not paid payment of the security deposit by the tenant. These extensions can be useful for landlords who need extra protection against the risk of tenants defaulting on rental income payments.
How do I choose a tenant rent guarantee insurance policy for rental income protection?
As a landlord, it's important to choose the right rent guarantee insurance to protect you in case your tenants don't pay their rent. There are a few things you should consider when choosing a rent protection insurance policy, including the excess amount of coverage you need and the type of protection you are looking for. With so many different options on the market, it can be difficult to try and determine which one is best for you.
1. How much is your rental property worth?
The first is the amount of cover you need. Make sure you calculate the value of your rental property so you know how much cover you need in case of damage. You should also consider the type of protection you are looking for.
For example, in some policies landlord legal expenses insurance cover if your tenant missed payments and you have to go to court. Other landlord legal expenses insurance policies will only cover the rent guarantee insurance quotes of damage to your rental property.
2. How many tenants should you cover?
You also need to decide whether you want a policy that covers all tenants or just one tenant. If you have several tenants, it might be worth getting a policy that covers all of them in case one of them fails to pay rent. Alternatively, if you have one particularly risky tenant, you may want to get a policy that covers only that tenant.
3. Compare quotes
Once you've decided on the basics, you can start comparing different policies on the market. Make sure you read the fine print to understand exactly what each policy does and does not cover. Once you've found a few policies that fit your needs, compare landlord insurance prices and choose the most affordable option.
What are the differences between rent-free and furnished tenancies?
In the case of an empty tenancy, rental insurance generally provides cover for not paid rent and for rental risks (water damage, fire, etc.).
As far as the rent guarantee for not paid rents is concerned, it can be covered by a second-ranking rent guarantee or by a deposit. This means that, in the event of the tenant's rent default, the rent guarantor that has rent protection or surety will be obliged to pay the not paid rent to the landlord.
The rental risk guarantee, on the other hand, is generally covered by a landlord insurance policy taken out by many landlord. In case there is a "make a claim", the insurer will pay the repair costs.
In the case of a furnished rental, the guarantees required are the same as for an empty rental, but it is also compulsory to take out furnished rent insurance. This insurance covers the risk of non-payment of rent by the student tenant and allows the landlord to continue to receive the rent, even if the tenant defaults. Thus, taking out furnished rent insurance is an additional guarantee for the lessor.
Another solution to guarantee the monthly rental payment of your rent is to entrust the management of your rental to an estate agency. In this way, its agents will take care of all the procedures in the event of unpaid rent.
Conclusion:
The guarantee for not paid rent has been compulsory in France since 1989 and allows landlords and estate agents to protect themselves against the risks associated with unpaid rent.
If you are a landlord or if you manage several rented properties, it is important to take out a GLI insurance policy to be covered in case your tenants fall to fail to pay the rent.