When renting a property, it is not enough to make sure that the amount charged by the owner fits into your budget. It is also necessary to prove that there is no risk of default. Those who do not have a guarantor who can take out the debt in an emergency of the tenant has the alternative of securing a surety in the lease. But how does surety bond work?
This type of guarantee has some rules that need to be observed by those who want to use it. So that you can get to know her better, we’ve prepared this article to answer the most common questions on the subject:
What is bail insurance?
This is a form of guarantee of the rent payment that exempts the figure of the guarantor. The insurance is contracted by the tenant and has the owner of the property as insured. The term of the policy will have the same period of the lease agreement. In general, the option for surety insurance is a way to expedite the approval of lease agreements.
What is insurance coverage?
The insurance is used basically to guarantee the owner of the property the payment of the rent due, in the case of default of the tenant, in addition to fines. It is also possible to contract additional coverages for other fees related to the property, such as IPTU, condominium, water or light, for example. It is possible to cover insurance expenses with eviction actions and legal fees.
How much does the bond insurance cost?
There is no fixed amount. It will depend on the variety of coverages that the landlord asks to rent the property. In general, the surety bond varies between 1.2 and 2 times the value of a rent. It can also be split in the same number of months of the lease.
With the popularization of surety insurance and the entry of more and more insurers in this market, the tendency is for the value to decrease more.
How is insurance coverage defined?
It is the owner of the property who decides what type of insurance the surety insurance should have and defines what rates you want the policy to protect. One caution that the homeowner must take, though, is with the final value of the surety bond. If you opt for very large coverage, the cost may be high and the rent will become more difficult.
For what property profile can bail insurance be used?
It is possible to use the surety insurance for lease of residential urban real estate, commercial real estate and non residential (like medical offices, for example).
Among the types of lease for which the use of the surety insurance is not allowed are the leases of parking lots, apart-hotels, hotels or similar and leases for partners or relatives of real estate owners and the owner of the property, among other cases.
What is the income required for the approval of the rent through the surety bond?
Each insurer determines a value, but the average is between 3 and 4 times the rent. In some cases it is possible to reach this amount by adding the income of up to 3 people who will reside in the property.
What documentation do you need to take out the surety insurance?
This varies for each insurer, but usually the personal documents (CPF and identity card), receipt of payment of the last 3 rents (if renting) and copies of the last 3 paychecks, payment receipts or some other proof of income. If the lessee is a company, in addition to the social contract must be presented personal documents and proof of income of the partners.
How is the renter reimbursed in the event of a tenant default?
After the first delay in paying the rent, the owner must trigger the insurer. First payment takes up to 30 days. The following installments of the rent will be paid regularly by the insurer until the tenant regularises the situation with the insurer. If there is no settlement, the tenant is in danger of being evicted.
What are the advantages of surety bond for the tenant?
First, the surety guarantor exempts the renter from seeking a guarantor. Financially, it is more feasible than the deposit bond and allows a more agile analysis of the lease. This is because, in addition to being a much lower value, it is also possible to install it for a period similar to the rental agreement.
What are the advantages for the owner?
The surety bond guarantees the owner of the property the faster payment of the rent amounts when the tenant defaults. It also reduces the process for the approval of the lease, reducing the time that the property is vacated, generating losses with taxes and taxes.
The possibility of including extra coverages also benefits the landlord, as he can guarantee compensation for damage to the property and even the termination of the contract by the tenant before the deadline.
And for real estate, what are the advantages?
In addition to guaranteeing the payment of the rents administration fee, since it eliminates default, the use of the surety insurance deprives the real estate company of conducting the customer registration analysis, which is the responsibility of the insurer.
In addition to the surety bond, what other modality can be used as collateral for the rent?
The most traditional form is the guarantor figure. Real estate agents and landlords require different profiles of guarantors, but generally they must have income well above the rental value and also own at least one property. A risk to the sector is the figure of the professional guarantors. In addition to charging tenants’ fees, they become risky as guarantors of the rent payment, precisely because they act in various lease agreements.