As a landlord, what can you do to protect yourself against rent default?

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Rent default is high on the list of landlords' concerns. However, just 2 to 2.5% of rents went unpaid in 2013 according to the impact study for the ALUR law on access to housing and urban renovation. In 70% of cases, payment default is due to a reduction in the tenant's income caused by an unforeseen event (unemployment, divorce, illness, retirement, etc.). The risk is significantly lower in furnished lets. This is because this type of accommodation is generally a short-term solution chosen by clients with more financial resources than those selecting an unfurnished let, and they will have budgeted the sum needed for the full duration of the let.

Landlords may nonetheless legitimately seek protection against rent default, because it would significantly reduce the landlord's own income and perhaps jeopardize mortgage repayments. What can landlords do to avoid such a situation? Here are some tips from Lodgis, a furnished lets specialist covering Paris and the surrounding area.


Take your time when choosing a tenant

When putting a furnished property up for rent, landlords should examine documents submitted by tenants carefully. To assess whether the prospective tenant is solvent, look at recent payslips and tax bills together with a copy of a contract of employment or statement from an employer. Landlords are strongly recommended to take their time when choosing a tenant, however much pressure the tenant puts them under to sign an agreement quickly.

If the prospective tenant's financial situation appears unsatisfactory, the landlord has several options:


These two approaches can be combined if the tenant is a student or apprentice.


Include a recission clause in the tenancy agreement

A recission clause provides for the agreement to be terminated by operation of law should one of the parties fail to fulfill a contractual obligation - should the tenant fail to pay the rent, in this case. Such a provision is not a standard part of the tenancy agreement and the landlord will need to add it in themselves. If the rented property is the tenant's main home, the recission clause cannot be applied until two months after an order to pay has been issued. If the property is not the tenant's main home, the landlord can also include in the rental agreement a penalty clause to encourage the tenant to pay their rent on time (for example, a 10% late payment penalty).


Track payments meticulously and communicate regularly

To avoid unpaid rents, landlords are advised to issue tenants with a call for rent payment a few days before the rent is due and then follow up within a few days if it is not received promptly. If the landlord is well-organized, the tenant is more likely to pay on time. The landlord should act the very first time the rent is late by contacting the tenant immediately to try to agree an amicable solution. The tenant may be entirely sincere. They may be experiencing a temporary cash-flow problem or perhaps even have overlooked the payment. The landlord may agree to allow the tenant an extension. Depending on the situation, the tenant may be eligible for assistance from the FSL (solidarity fund for housing) to help them overcome temporary financial difficulties.


Changes introduced by the ALUR law


The vast majority of investors are individuals who buy-to-let to secure themselves a supplementary income or in anticipation of retirement. The most prudent approach they can take to protect themselves against the potential detrimental effects of unpaid rent is to entrust the process to a rental management professional who will advise them and make all the necessary arrangements.




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