13. Protection Against Arrears of Rent on French Rental Property

1. 13.1. Rental/Damage Deposit
   13.2. Insurance Policy
   13.3. Government Rental Guarantee
   13.4. Personal or Institutional Guarantor

13.3. Government Backed Rental Guarantee on a French Rental Property

We saw in previous pages that, whilst is is possible to take out insurance against the non-payment of rent, this option is not available where the rental is higher that 33% of the income of the prospective tenant.

Accordingly, in January 2007 a government backed insurance scheme was introduced for those on low incomes, or in insecure employment, although it can be equally used for any tenant.

Under this scheme the rental is guaranteed for 24 months in the event of default by the tenant.

It also provides insurance against damage carried out to the property by the tenant, up to the value of €7700.

The guarantee can also be used in tandem with the rental deposit guarantee Loca-Pass, so that all your bases are just about covered - the rental deposit, as well as the rent.

The scheme is only offered through a handful of insurance companies and banks that otherwise offer their own policies insurance against the non-payment of rent. It is guaranteed by a government insurance fund.

The government have set a ceiling on the cost of the insurance premium, which cannot be greater than 2.5% of the rental. This is generally cheaper than private policies that are on the market.

That is probably one of the main reasons why it has become so popular, with around 130,000 tenants insured through the scheme by the middle of 2008.

The insurance premium is tax deductible.

Anecdotal evidence suggests that the government agency managing the scheme takes a fairly generous view of the rentals they are prepared to accept. Do not misled into thinking that the rental has to be at the lower end of the market. It all depends on the type, size and location of the property. The maximum rental (plus charges) under the scheme is €2300 per month.

The procedure for obtaining the insurance is that the tenant needs to make application to the government agency overseeing the scheme to obtain a certificate of entitlement, called a PASS GRL. The agency may state the maximum rental entitlement under the scheme.

Application by the tenant can be made over the internet at GRL Gestion.

Once the prospective tenant has received confirmation of their entitlement to a PASS-GRL, then the landlord can make application for an insurance policy from one of the participating insurance companies in the scheme. You will need to supply proof of tenant income and other documents to the insurer, which will be explained to you on the application form.

Existing tenants are also eligible to join the scheme and a PASS-GRL is not necessarily required by them, provided they have been a tenant for at least six months, and they are up to date with their rental payments.

The government agency, or participating insurer, assumes responsibility for any legal proceedings that may be necessary in the event of default on the rental.