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Rent Guarantee Insurance

DATE: 20/04/2020


The information contained within this article has been provided by Legal Insurance Management Group (LIM)

Following implementation on Wednesday 25th March 2020 of the Coronavirus Act 2020, and the subsequent decision of the Courts to suspend all housing possession actions, please see the below update on how Legal Insurance Management Group (LIM) will deal with rent guarantee policies and claims.

 

Coronavirus Act 2020 & Suspension of Housing Possession Actions

The Act increases the period of notice that must be given to a tenant for possession of the property, in relation to rent arrears, from two weeks to three months, with provision to increase this further.

There, whilst notice of required possession can still be issued, no court proceedings to enforce possession can be commenced until the three-month notice period has elapsed.

Alongside this, the Master of the Rolls, with the Lord Chancellor’s agreement, has, for at least 90 days, suspended all ongoing housing possession action. This means that neither cases in, or about to go into the court system, can progress to a stage where a tenant can be evicted.

Where eviction dates have already been set, county court bailiffs are now refusing to attend properties to evict tenants, where those tenants are known to remain in occupation of the property.

The Government has set out its intentions for landlords and tenants to mediate in order to reach an amicable and mutual agreement to deal with any rent arrears. The Government is working with the Master of Rolls to-enshrine this principal within the Court pre-action protocols, which means that unless an attempt to reach an agreement with the tenant has been made, possession orders will not be granted.

During this time of national crisis, it is important to consider the above restrictions in the context of the unprecedented levels of financial assistance being made available to both businesses and the public, intended to reduce the risk of tenants falling into rent arrears in the first place. In addition to this, and to lessen any adverse impact to landlords, ‘mortgage holidays’ will be made available.

 

Existing and New Claims Reported under Existing Policies

Neither the Coronavirus Act 2020, nor the suspension of housing possession orders, goes as far to ‘ban’ tenant evictions as previously suggested. Instead, they place a moratorium on evictions of at least three months.

Because of this, LIM believe that prospects of successfully evicting a tenant remain, albeit with a longer eviction process to consider.

Feedback that LIM’s  partners have received from their landlord customers clearly indicate that evicting tenants is not the preferred option for most landlords. This is also in line with the Government’s intention that landlords and tenants should endeavour to mediate wherever possible, and the proposed changes to the Court pre-action protocol. LIM therefore believe that the introduction of a service to facilitate this mediation should be provided as part of the rent guarantee claims process.

Given the above, LIM have been able to confirm the following:

  1. They will continue to cover rent guarantee claims, and legal expenses to evict tenants during the period of the Act, as long as there remains the prospect of successfully evicting the tenant at a future point in time.
  2. They are in discussions with a mediation service provider to integrate a mediation facility for the landlord and tenant into their claims process.
  3. For new claims reported after implementation of the Act, i.e. from Wednesday 25th March 2020, and once the mediation service is in place, rent guarantee payment will be made:

    - after the landlord has actively engaged in mediation with the tenant, and

    - has been unable to reach an agreement to deal with any rent arrears, and

    - we have therefore issued notice for possession to the tenant.

Further information around the mediation service will be provided when available.

 

New Business Sales

Following suspension of the sale of new policies, LIM continue to assess the impact on their rent guarantee insurance policies of the Act; the suspension of housing possession actions; the proposed new pre-action protocol and the position taken by the County Court Bailiffs. LIM are liaising with underwriters and will provide an update on the position of new sales at the earliest opportunity that they are able to do so.

 

Renewals of Existing Policies

Underwriters continue to permit renewals of existing rent guarantee insurance policies currently insured with LIM, and as with new business sales, they will endeavour to provide an update on any change in the position of renewals as soon as possible.