13. Protection Against Arrears of Rent on a French Rental Property

1. 13.1. Rental/Damage Deposit
2. 13.2. Insurance Policy
3. 13.3. Guarantor

13.2. Insurance Against Non-Payment of Rent

One of the most easiest and effective ways of securing the rent is for a landlord to take out an insurance policy against the non-payment of rent.

In the past, landords have been able to select from a range of different policies offered by the French insurers.

These policies are called l’assurance loyers impayés.

The problem with the policies has been that insurers were rarely prepared to cover those tenants on a low income or in insecure employment.

In all cases the rent could not be greater than 33% of the income of the tenant. In many cases they often required a lower percentage, either because the tenant had debts to repay, or because the income was considered to be secure enough.

As a result, landlords were unwilling to let to such groups, who then often found it impossible to obtain access to the private rental sector.

Since 2007 there has been a government backed insurance scheme for those unable to meet the criteria of the insurers.

This scheme is called Garantie des risques locatifs (GRL).

While the scheme has been able to help around 150,000 tenants into private sector rental accommodation, it has not been entirely accepted by the insurers, who have wished to retain their own products and independence. The policies are also less profitable than their own policies.

This means the GRL may become the only rental insurance scheme in the market, albeit that it will be marketed by the insurers.

Insurers can still have their own policies, but they will not be able to also offer the GRL alongside these policies. However, this may well mean that not all insurers will offer the GRL policy.

The GRL policy guarantees the monthly rental and charges, provided they are no greater than €2000 per month.

The 50% ceiling is a level that many consider to be too generous, as it may cause tenants to take on a property they cannot afford.

In the event of default of the tenant, the rental is guaranteed until recovery of possession or departure of the tenant, up to a maximum of €70,000.

It also provides insurance against damage carried out to the property by the tenant, up to the value of €7700 (€3,500 for furnished lettings).

The level of the insurance premium varies slightly as between companies, but should be between 2% to 3%. However, not all companies are yet (2010) offering this product, so you may need to look around.

The insurance premium is tax deductible.

A landlord is not entitled to demand from a tenant a guarantor if they have been able to obtain an insurance policy, except in relation to students and apprentices.

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 if they consider the rent demanded by the landlord to be excessive.

Application by the tenant can be made over the internet at APAGL.

Once the prospective tenant has received confirmation of their entitlement to a PASS-GRL, the landlord can make application for insurance from one of the insurance companies. 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.

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.

You need to be careful about taking on a tenant on the basis of the PASS-GRL alone; you also need to obtain the insurance policy itself!

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