Risks in Lettings - Avoid an Uncomfortable Conversation

LONDON, April 21, 2010 - Although an overwhelming majority of letting agents surveyed this month
by Let Insurance Services stated that non-payment of rent is the biggest
single risk for landlords in the private rented sector, only half said they
discuss insuring against this with their clients.

And less than one-third offer to arrange insurance for loss of rent and
legal expenses or even to advise landlords to make their own insurance
arrangements.

"There may not be a legal duty of care to advise clients of the existence
of insurance but there is a professional obligation. It is best practice
among regulated agents to warn landlords of the various risks and how they
can mitigate them through specialist insurance policies," said Michael
Portman, Managing Director of Let Insurance Services.

"References taken out on tenants can only assess the risk of default at
the start of a tenancy," he added. "Good letting agents take great care with
this process but changes in circumstances can lead to difficulties over
paying the rent. When there is no insurance, there is an inevitable and
uncomfortable conversation with the landlord."

Insuring the rent is also in a lettings agent's interest as it protects
both the landlord's income and the agent's fees.

Although Let Insurance Services does not suggest there should be health
warnings about the risks in letting, agents should discuss their landlords'
attitude to risk and whether they can afford the legal costs and loss of rent
should tenants default.

Ian Potter, Operations Manager for ARLA, the Association of Residential
Letting Agents, said, "There is a very real potential for expensive
consequences for agents who have not taken a rounded approach to risk
management and whose landlords have been exposed to loss of rent or expensive
litigation. These landlords could then query an agent's professional
competence. However, our members take insurance and good referencing more
seriously than ever before."

Property Ombudsman Chris Hamer concurs, "It must be best practice for
agents to give landlords all the information available. I cannot understand
why every landlord is not covered by rental guarantee and legal expenses
insurance and this is particularly important for 'accidental' landlords who
are often as much potential victims of the recession as their tenants."

At the Referencing Forum initiated and organised by the National Approved
Letting Scheme, NALS, in partnership with the Property Ombudsman, it became
clear from the increasing number of complaints to the Property Ombudsman that
the expectations and understanding of agents, landlords and tenants vary
widely.

"We must look for consistency of approach to referencing, access to
referencing agencies and service levels offered," said Caroline Pickering,
Chair of NALS.

"Meanwhile, agents should do as much as they can to mitigate risk.
Landlords can feel more secure if rent and legal expenses are covered. This
can only be good for potential tenants and for the optimum use of the housing
available through the private rented sector," she added.

Michael Portman pointed out that, although arranging insurance falls
under FSA regulations, "This is not a barrier to letting agents advising
clients of the risks in lettings. Letting agents that are Appointed
Representatives, RICS exempt or directly authorised can arrange cover. All
other agents should be able to provide details of specialist insurance
providers."

To learn more about specialist insurance in the private rented sector
visit www.letinsurance.co.uk

Media contact: Malcolm Harrison +44(0)20-7581-8335