"If landlords can't recoup lost rental income, then that can quickly erode any returns they are making from that property"
- Ravi Sejpal - Karis Insurance
Buy-to-let landlords are being urged to review their insurance cover urgently following the introduction of the Renters' Rights Act on 1 May, with rent guarantee insurance now seen as an essential safeguard against prolonged periods of unpaid rent.
Karis Insurance, a real estate finance and insurance specialist, warns that the legislation could leave landlords significantly exposed. The Act means evictions for rent arrears must now go through the court system, and even with an online repossession service available, delays and backlogs are widely anticipated.
The threshold for beginning eviction proceedings has also risen: tenants can now build up three months of rent arrears before a landlord can act, compared with two under the previous rules.
"If landlords can't recoup lost rental income, then that can quickly erode any returns they are making from that property," said Ravi Sejpal, director of insurance at Karis Insurance.
"Reviewing insurance now is not just sensible, it could prove essential once the new rules take effect. It's not clear how long a repossession will take under the new system, so landlords can take out a rent guarantee insurance, providing them with the security of a 12-month indemnity period. It's accepted that many other parts of the civil court system in the UK suffer from delays and backlogs."
Rent guarantee insurance covers rent payments for up to 12 months while a landlord waits to regain possession of the property and find a paying tenant. Given the uncertainty around how long repossessions will take under the reformed court process, that level of cover could prove critical.
The policies also extend to legal costs. Cover typically includes fees for:
- tenant eviction proceedings
- mediation
- pursuit of rent arrears
"Legal disputes can quickly cost thousands, especially if cases drag on under the new Act," Sejpal added.
"Without the right cover, landlords risk being substantially out of pocket just to regain control of their own property. At Karis Insurance, we help landlords get the right specialist cover in place fit for new complexities in the rental market. With rent guarantee insurance typically costing £295 a year, it provides excellent value for money for landlords looking to mitigate the risk of renting in a changing legal landscape."
With buy-to-let investment already under pressure from higher mortgage costs and tax changes in recent years, the added legal complexity introduced by the Renters' Rights Act has sharpened attention on risk management. Rent guarantee insurance, long considered a discretionary product by many landlords, is now being positioned as a practical necessity in the current environment.
