The insurance category guarantees the owner the receipt of rents and guarantees agility in the approval of the rent proposal
SÃO PAULO – Tenancy guarantee insurance replaces the guarantor and guarantees the owner of urban property (lessor) the receipt of rents and charges due and not paid by the tenant. This, in turn, gains agility in approving your lease proposal.
Tenancy surety insurance is regulated by specific rules, mainly the Tenancy Law, which defines and limits lease guarantees. The general rules of rental surety insurance were established by Resolution No. 202, of 2008, of the National Council of Private Insurance (CNSP).
Among the main characteristics is the prohibition of the same lease contract having more than one insurance of this type. It also determines that the term of validity of the insurance guarantees is the same as the lease agreement. It is the tenant who pays for this insurance, whether an individual or a legal entity.
What types of properties can take out rental bond insurance?
It is a service that can be contracted for renting residential, commercial and non-residential urban properties (offices, offices, etc.). Tenant surety insurance eliminates the need for the tenant to seek a guarantor and prevents the candidate for the property from embezzling their savings to gather money equivalent to three or more months of rent, assuming that it is necessary to make a deposit (security deposit) as a guarantee for the lessor. .
This type of insurance, however, does not exempt the defaulting tenant from paying what he owes. The insurer, who paid the rent and charges to the owner of the property (insured), will seek reimbursement of the total amount it spent, collecting the debt from the defaulting tenant. The collection may be judicial, including.
Is rental surety insurance a guarantee of approval of the applicant for renting the property?
No. The proposal for rent guarantee insurance may not be approved if the candidate has, for example, his name registered with a credit protection institution. Another reason for refusal is when the insurer assesses that the applicant is unable to pay the rent. The insurer’s assessment of the tenant’s registration is similar to that carried out by credit institutions.
What is the income required to approve the registration of the future tenant?
Generally, the prospective renter must prove monthly income equivalent to three or four times the rent amount. It is common for insurers to accept income composition of up to three people who may or may not live in the property.
What are the advantages of rental bond insurance over other options?
A deal is only good when it serves the interests of all parties. In the case of rental surety insurance, both tenants and landlords and real estate agents have advantages.
Advantages for the tenant
• Avoids the embarrassment of looking for a guarantor.
• Provides more flexibility in contract approval.
• It avoids the immediate disbursement of the security deposit (deposit equivalent to three times the monthly rent amount).
• Installment of the premium.
• Progressive discounts on insurance renewals.
• Some insurers offer extra coverage for the tenant, such as discounts on transporters for moving and 24-hour assistance services, such as minor repairs and water tank cleaning, among others Advantages for the owner • Faster receipt of rent for the guaranteed
property insurance, in the event of delay or default by the tenant, without having to wait for the completion of any legal proceedings.
• Effective guarantee of the lease until the end of the contract, with the certainty that you will receive the rent and charges, in case the tenant does not pay.
• Elimination of the risk of professional guarantors.
• Additional coverage for physical damage to the property, fine for contract termination and complete painting of the property, among others.
• Possibility of legal assistance from the insurer.
Advantages for real estate
• Dismisses the registration analysis, which is now carried out by the insurer. This also eliminates the risk that the real estate agent assumes when approving the registration.
• Several insurance brokers specialized in the field already carry out the job of assisting prospective tenants, filling out a registration form, collecting documents and sending documentation and analysis to the insurer. By assuming this work, the insurer eliminates the cost that the real estate would have to carry it out.
• Possibility of legal assistance from the insurer, if necessary.
• The certainty of receipt of the rent guarantees regular receipt of the property management fee.
In addition to rental bond insurance, what are the other options to guarantee rent payment?
The most traditional ones are guarantor, first, and then deposit (or guarantee). Although the preference is still for the guarantor, the demand for insurance is increasing. Among the causes of this trend are the difficulty of getting a guarantor and the restrictions made by property owners who do not like the possibility of receiving late rents only after the conclusion of any tenant’s eviction action.
In addition, the changes in the Tenancy Law also discouraged the acceptance of a guarantor, because they allow him to withdraw from the commitment in certain situations. The deposit (or bond), in turn, can be made in real estate or money deposited in a savings account or capitalization bond or investment funds, as provided for in the Tenancy Law (Law 8,245, of 1991, with the amendments introduced by Law 12,112 of 2009 and Law 12,112.
The deposit also makes reluctant landlords who consider the three-month rent guarantee insufficient time, in case legal action is needed to repossess the property.
Of the alternatives for guaranteeing receipt of rent, which one tends to have increasing acceptance?
Tenancy surety insurance is gradually increasing its share of the rental market, with a consequent reduction in more traditional forms. Property administrators, mainly in large urban centers, advise owners, their clients, to opt for renter surety insurance.
Some real estate agencies even work only with insurance to guarantee receipt of rent. The deposit (or bond), despite being the second most used option, is seen as an insufficient guarantee to cover damages in case of default by the tenant. The amounts deposited correspond to a maximum of three months’ rent, while the deadline for the judicial conclusion of an eviction action is much longer. The guarantor, in turn, is increasingly difficult to find.
In addition to people avoiding giving bail to friends and relatives, there are many requirements for accepting a guarantor. Among them is the presentation of more than one residential property, because if it is necessary to activate the guarantor to honor rents not paid by the tenant, the pledge of the only residential property of the guarantor is unconstitutional, according to a decision of the Federal Supreme Court.
In addition, for the guarantor to be accepted, the prospective tenant must present a person who owns real estate located in the same municipality in which he will rent. The requirement is due to operational and legal costs if the landlord has to file an eviction action for non-payment.
