Rental Guarantees in France
Tuesday 01 September 2009
The French government has introduced a new system of rental guarantees for landlords.
Yes, you did read that correctly; if you let out property in France, you can get the government to guarantee the rent.
Landlords have always had the possibility of taking out a private insurance policy against the non-payment of rent.
However, these policies are not available where the rent exceeds 33% of the income of the tenant.
They are also generally restricted to tenants who have a permanent contract of employment.
While there has been a statutory scheme in existence for those tenants who do not meet the income or employment criteria of the private insurers, it is ultimately the insurers who operate the scheme.
Few have been willing to do so, as they have found it more lucrative to stick with their own policies, or to not take on the tenant if they do not meet their own criteria.
The government have now decided to oblige all insurers to adopt the statutory scheme for all private sector tenants, although a landlord is not obliged to take out a policy.
One of the benefits of the statutory scheme is that the insurers will be required to accept the tenant provided the rent does not exceed 50% of their income.
For the landlord, the monthly premium will also be lower than those that have generally been payable. Private individual landlords will need to pay 2.5% of the rental per month, while corporate landlords can get a cheaper premium.
Under the new arrangements, the prospective tenant will need to apply to a government agency to obtain a certificate of entitlement, following which the landlord can then use this certificate to make application to a private insurer for insurance cover.
Although the notion of a government backed scheme of rental insurance does seem reckless and expensive, it will be the insurers themselves who will pay for it, through the reverse premiums they will need to make to the government agency administering the scheme.
You can read more in our substantially updated Guide to Letting Property in France.