In Turkey, while many people secure housing by paying rent, an increasing number leave without paying and change residences. Unfortunately, without proper agreements, landlords often face significant difficulties collecting overdue rent. Even when a deposit is required at contract signing, several months of unpaid rent can far exceed that amount. In such cases, Rent Guarantee Insurance comes into play.
What Is Rent Guarantee Insurance?
Rent Guarantee Insurance secures unpaid rent when tenants are unable or unwilling to pay in certain circumstances. It is provided on condition that landlords pay a policy fee to an insurance company. This protection benefits both tenants and landlords: unpaid rent due to bankruptcy, disability, or death is covered. The deposit is also included within the scope of this coverage.
How Is Rent Guarantee Insurance Arranged?
Many private insurance companies offer rent guarantee policies, similar to other property or vehicle insurance arrangements. The typical steps and conditions include:
- The landlord must enter into an agreement with a chosen insurance company.
- The insurance company must be provided with the identity and contact information of both tenant and landlord.
- The landlord determines the coverage amount to be paid under the insurance.
- Both parties should be informed about the terms of the insurance policy.
- During the policy period, the landlord must send at least two formal written warnings (notarized notices) proving that the tenant failed to pay.
- The landlord must deposit the tenant’s security deposit into a bank account and document that it is held securely at the bank.
- All written correspondence between tenant and landlord should be retained as records.
- The landlord must not have granted occupancy rights before the deposit is paid to the landlord.
- The signed rental agreement between the parties must be provided. It does not have to be notarized; original wet signatures from both parties are sufficient.
- Insurance companies generally offer coverage for up to six months under these policies.
- Contracts signed before the policy start date can still be covered.
- Compensation amounts for unpaid rent vary by insurance provider; therefore, monthly insurance premiums are not fixed across companies.
To better understand the scope of rent guarantee insurance, it helps to look more closely at the specific situations in which an insurance company will make payments.
Coverage Items for Tenants
- If a tenant is dismissed from their job, the insurance company pays the rent to the landlord on condition that the tenant applies for unemployment benefits.
- If the tenant is a taxpayer or shareholder and declares bankruptcy, the insurance company pays the rent when the tenant provides official proof of bankruptcy.
- If the tenant dies, the insurance covers rent upon presentation of a certificate of inheritance; if the tenant becomes disabled, a medical report documenting the disability must be provided for coverage.
Coverage Items for Landlords
- If the tenant fails to pay rent after the due date and the legal five-day grace period has passed, the insurance company covers the unpaid rent.
- Amounts counted as advance payments or deposits, and other debts the tenant owes the landlord, are included and paid under the insurance coverage.
- If the tenant is responsible for condominium fees or other building-related charges and fails to pay, those amounts are covered by the insurance company.
- If legal fees arise in relation to rent collection, attorney costs can also be included within the insurance coverage.