Loyers impayés: comment s’en protéger?

While investing in rental properties is an activity that allows you to generate rather significant financial gains, the fact remains that rental management also involves its share of risks. And in this respect, non-payment of rents is at the top of the list.

A real “nightmare” for property owners, it is considered to be the most common risk, certainly, but also the most harmful since it invariably disrupts the financial balance of the rental activity, particularly when the amount of the rent is used to repay the bank loan taken out to finance the rental property investment.

But then, are there ways to  protect yourself against unpaid rent?  When can we talk about a tenant in default of payment? And when non-payment of rent is noted, what can be done to remedy it?

Preventing default on rent and providing guarantees

Although there is no miracle solution to definitively eliminate the risk of non-payment of rent, certain precautions can provide the owner with protection, a priori, against unpaid rent.

• First of all, it is essential to  carefully select your future tenants , paying particular attention to the solvency criterion. Indeed, verifying the solvency of the future tenant is essential, which implies ensuring, as far as possible, the authenticity of the information provided by the potential tenant concerning his professional and financial situation, in particular.
• Secondly, it is not useless to ask, at the time of signing the rental contract, for  a security deposit  or even to require a security deposit in order to guarantee the non-payment of the rent by the tenant, when the latter does not benefit from a stable financial situation or when his monthly income does not seem sufficiently high.
• Thirdly, the owner can take out insurance against unpaid rent,  the Guarantee against Unpaid Rent (GLI)  which also covers the costs of the tenant’s eviction procedure. It is therefore very effective, especially since it covers both unfurnished and furnished rentals. This guarantee – which must be taken out  before signing the lease  – is largely dependent on the tenant’s solvency. In fact, most insurers require documents proving that the future tenant’s net monthly income is equivalent to three times the amount of the rent to be covered, before accepting your request to take out a GLI

Identify non-payment of rent and take action

In fact, unpaid rent is rent that has not been paid into the landlord’s account within the agreed time frame. Therefore, the rent is considered unpaid by the landlord of the rental property from the moment the payment deadline is reached, without this financial commitment being honored.

Faced with this observation, the owner must react as soon as the first rent is unpaid, because the faster he intervenes, the more likely he is to resolve the problem and limit its impact. This involves several steps that it is essential to undertake without delay:

• contact the defaulting tenant very quickly to inquire about the reasons for this non-payment: is it the result of temporary financial difficulties or is it a simple delay or even an oversight?
  This will determine the steps to be taken by the owner of the rental property. The ultimate objective will be to allow a return to normal through an amicable agreement or, where appropriate, to opt for legal action to result in the eviction of the defaulting tenant.
• launch automatic, semi-automatic or manual reminders to encourage the tenant to honor his rental debt. These reminders can be done by email, SMS or postal mail. In this regard,  the use of rental management software  can be very advantageous, because reminders can be programmed to be sent even before the end of the rent due date, which offers the owner a valuable time saving, both before and after the non-payment is noted.

• a formal notice letter by registered mail will ultimately be necessary before considering legal action. The owner can also assert the termination clause, when this is provided for in the rental contract, and send a payment order to the recalcitrant tenant by bailiff. If this measure remains ineffective, he can take legal action to obtain an eviction order and enforce it. All this while respecting the time limits provided for by law, to ensure the validity of the procedure.

Finally, the owner of the rental property must know that even in the event of eviction of the defaulting tenant, he still has the possibility of taking action to seek recovery of his unpaid rent. The judgment thus obtained will be enforceable for ten years; it is sufficient that the tenant (or his guarantor) has property, movable or immovable, covering the entire amount owed.

So many hassles that the owner of rental properties can avoid, by using rental management software which allows them to better prevent non-payments, while facilitating administrative procedures in the event of problems.

Read also:  rental management  and 3 tips on rental management