Rent your apartment safely: security deposit, various guarantors, insurance
As a homeowner, protecting your real estate investment and securing your rental income should be a priority. Requiring the appropriate documents and guarantees from tenants can help reduce the risks of unpaid rent, property damage and disputes during or after the tenancy.
Below is a practical guide to the main documents and measures landlords can use to better protect a rental property.
Guarantees to Protect Your Rental Property
One of the main concerns for landlords is dealing with tenants who fail to pay rent or cause significant damage to the property.
To limit these risks, a landlord may require several important guarantees and documents:
- A security deposit
- A rental guarantor or another form of rental guarantee
- A valid home insurance certificate
1. The Security Deposit
The security deposit is one of the most important safeguards available to landlords. It may be used to cover unpaid rent, unpaid charges or damage caused by the tenant, subject to the applicable rules and supporting documents.
Security Deposit Requirements and Limits
The security deposit should be collected when the lease is signed. Its amount must be clearly specified in the rental contract and comply with the applicable legal limits.
- For an unfurnished rental, the deposit may not exceed one month’s rent excluding charges.
- For a furnished rental, the deposit may not exceed two months’ rent excluding charges.
Returning the Security Deposit
The security deposit should generally be returned within one month after the tenant leaves the property when the departure inventory is consistent with the entry inventory.
When there are unpaid rents, unpaid charges or documented damage, the landlord may retain the corresponding amount. Any deduction should be justified by appropriate evidence, such as the entry and departure inventories, estimates, invoices or other documents showing the cost of the necessary repairs.
When deductions are required, the remaining balance of the security deposit must generally be returned within the applicable legal deadline.
2. Rental Guarantors and Rental Guarantees
A landlord may ask a tenant to provide a rental guarantor. The guarantor may be an individual or, in some cases, a legal entity such as a bank or specialized guarantee company.
The guarantor agrees to pay the rent, rental charges and certain repair costs owed by the tenant if the tenant defaults on their obligations.
The guarantee agreement may specify a maximum amount for which the guarantor accepts responsibility. It should clearly state the duration and extent of the guarantor’s commitment.
Documents Required from a Guarantor
Like the tenant, the guarantor may be asked to provide documents confirming their identity, financial situation and ability to meet the rental obligations.
These documents may include proof of identity, proof of address, employment documents and evidence of regular income.
What If the Tenant Does Not Have a Personal Guarantor?
When a tenant cannot provide a personal guarantor, other solutions may be considered, including a bank guarantee or a guarantee provided by a specialized rental guarantee service.
The Bank Guarantee
A bank guarantee is designed to protect the landlord against the risk of unpaid rent. The tenant deposits a sum of money into a blocked bank account for the duration of the lease.
The amount may correspond to several months of rent and, in some cases, up to one year’s rent. Depending on the agreement, the bank guarantee may need to be renewed periodically.
How Much Does a Bank Guarantee Cost?
In addition to blocking a significant amount of money, the tenant may be required to pay monthly or annual bank service fees.
For example, fees of approximately €30 per month would represent around €360 per year. Part of this cost may be offset by any interest earned on the money held in the blocked account, depending on the bank’s conditions.
Advantages and Disadvantages for the Landlord
- Advantage: A bank guarantee may offer strong financial security because the guaranteed funds have already been deposited with the bank.
- Disadvantage: The landlord may need to contact the bank formally and provide the required documents to claim or release the guarantee.
Advantages and Disadvantages for the Tenant
- Advantage: The tenant does not need to ask a relative or friend to act as a guarantor.
- Disadvantage: A substantial amount of money remains unavailable during the lease.
- Disadvantage: Bank fees may be relatively high.
- Disadvantage: Recovering the blocked funds after leaving the property may take time.
Practical advice: During the departure inventory, the tenant should ask the landlord for any documents required to release the bank guarantee.
3. Comprehensive Home Insurance
Tenants are generally required to insure the rented property against common rental risks, including fire, explosion and water damage.
The landlord should therefore request a valid home insurance certificate when the tenant moves in and may request an updated certificate during the tenancy.
If the tenant does not provide proof of insurance, the landlord may be entitled to take measures provided for by the lease and applicable regulations. Depending on the circumstances, this may include initiating a lease termination procedure or purchasing insurance on the tenant’s behalf and charging the corresponding cost.
4. Additional Precautions for Landlords
Documents and guarantees are important, but landlords should also take additional precautions when selecting a tenant and preparing the lease.
Check the Tenant’s Financial Situation
Review the tenant’s application carefully and verify that their income is regular and sufficient to cover the rent and living expenses.
A commonly used guideline is that the tenant’s income should be approximately three times the monthly rent. However, the tenant’s complete financial situation should be considered rather than relying on a single criterion.
Include a Lease Termination Clause
The lease may include a termination clause setting out the circumstances in which the contract may be terminated, particularly in the event of unpaid rent, unpaid charges or failure to obtain the required insurance.
This clause should be drafted carefully and comply with the applicable rental regulations.
Prepare a Detailed Property Inventory
A precise entry inventory is essential for protecting both the landlord and the tenant.
The condition of every room, fixture, appliance, piece of furniture and item of equipment should be recorded carefully. Photographs may also be added to provide further evidence of the property’s condition at the beginning of the tenancy.
A similarly detailed departure inventory will make it easier to distinguish normal wear and tear from damage attributable to the tenant.
Unpaid Rent Insurance for Landlords
Landlords may also take out unpaid rent insurance, commonly known in France as Garantie Loyers Impayés or GLI.
This type of insurance may cover unpaid rent and, depending on the policy, legal costs, property damage or other rental risks.
The cost of unpaid rent insurance may vary according to the insurer and the level of coverage selected. Premiums are often calculated as a percentage of the annual rent, including charges.
Before subscribing, landlords should compare the eligibility requirements, exclusions, waiting periods, reimbursement limits and supporting documents required by each insurer.
Specialized Rental Guarantee Services
A tenant who does not have a personal guarantor may also use a specialized rental guarantee service, such as Garantme.
These services assess the tenant’s application and, when accepted, provide the landlord with a guarantee against certain unpaid rental obligations.
Before accepting this type of guarantee, landlords should review the provider’s conditions, coverage limits, duration, claim procedure and exclusions.
How to Protect Your Rental Property Effectively
Protecting a rental property requires several complementary measures. A security deposit, a reliable guarantor, valid home insurance and a carefully prepared lease can significantly reduce the risks faced by a landlord.
It is also important to review the tenant’s application carefully, prepare a detailed entry inventory and keep all rental documents, invoices and correspondence throughout the tenancy.
By combining the appropriate documents, guarantees and insurance policies, homeowners can protect their property while establishing a clear and secure rental relationship with their tenants.
Photo by Darío Gutiérrez on Unsplash.
Editor: Siyi CHEN
