Northwood, a provider of Guaranteed Rent, has today launched a guide to help explain the key differences in the variety of offerings that fall under the umbrella term of ‘Guaranteed Rent’.
The guide says that with up to 1.2m landlords in England, there are as many different types of landlords as there are tenants. However, despite the common misconception that landlords often own a large portfolio of properties, according to the Communities and Local Government’s Private Landlord Survey in 2010, 78% of all landlords only own a single property.
This means the majority are in no way property ‘giants’ but instead many rely on a steady rental income from their rental property. They simply cannot afford risk of tenants’ consistently paying their rent late or indeed missing payments completely. Recent statistics (LSL Tenant Arrears tracker, April 2014) reveal that at any time 6.9% of tenants are two or more months behind in their rental payments and nearly 40% of landlords have experienced rental arrears in the last 12 months (NLA survey Dec 2013). The appeal of Guaranteed Rent as a safe alternative for a reliable rental income is evident.
According to Northwood, the number of different Guaranteed Rent offerings on the market is creating misunderstanding, meaning landlords are potentially unaware of the rental agreement they are entering into and indeed the service that they have in fact signed up for. For example, looking at Guaranteed Rent Insurance, according to the Residential Landlords Association there are more than 116 different Guaranteed Rent Insurance products on the market, which vary considerably in the cover they offer and in their costs.
More and more landlords are also being caught out in the rise of illegal Rent to Rent, where agents or individual tenants themselves sub-let the property. The practice has been associated with landlords simply not knowing that the person who they thought was their tenant was actually sub-letting the property to others.
Earlier in the month the bailiff firm, The Sheriffs Office, reported that the practice of illegal Rent to Rent was on the rise, with tenants finding themselves on the street after thinking they had rented rooms from legitimate landlords, and equally landlords who find that their tenant has sub-let their property out, room by room, to people they have never laid eyes on, let alone checked for references.
Northwood’s free Guaranteed Rent vs Guaranteed Rent Guide helps to unravel the four main offerings on the market; Guaranteed Rent Insurance, Northwood’s Guaranteed Rent, Council-Backed Rent and Rent to Rent. The Guide breaks down the different services and highlights key differences between them
Eric Walker, managing director of Northwood, said: “We receive thousands of enquiries from landlords every year who are genuinely confused by the range of Guaranteed Rent services. Whilst the headline label for these services might be similar they are often incorrectly used interchangeably where in fact there are fundamental differences.
“The key difference between Guaranteed Rent and more traditional lettings services is that it is a contract between us and the landlord in which we effectively become the tenant. With our Guaranteed Rent scheme, we rent the property directly from the landlord then pay the landlord a fixed rent every month, regardless of if the property is let and regardless of if the tenant doesn’t pay. We always make sure that the property is let to a tenant suitable for the type of property and that there are no structural changes made to create additional bedrooms. One of the key features and perhaps the most reassuring for landlords is that the correct, legally compliant tenancy agreement is used, ensuring that the landlord is never placed in a vulnerable position.
“Offering guaranteed rent is not as easy as people think and a lot of the companies offering a guaranteed rent service are taking on far too much risk and growing too quickly without the financial resources to support their commitments. We are extremely selective about the properties and tenants we take on as it is not in our interests to accept tenants who pose a risk.
“The key to our success has been gradual, organic growth over nearly 20 years avoiding taking on too much risk and ensuring that our landlords are protected every step of the way.”