In the week between Christmas and New Year’s Day, when landlords have historically encountered the most difficulty finding tenants to fill their vacancies, the issue of rent loss is once again in the forefront of our discussion on maximizing revenues for all the landlords we represent. In 2007, we saw a surge of buildings being sold and converted to condominiums. Unfortunately, in many cases, their developers have been unable to sell those condominiums. To make matters worse, the bad economic conditions and failing job market have forced younger rental prospects to continue to live with their parents, and older prospects to either downsize, move in with roommates, or to simply move out of New Jersey. The result is a high number of vacancies and few tenants to fill them. Landlords who are used to pre-screening their tenants for credit problems and eviction history may no longer have that luxury. Higher than ever vacancy rates have forced landlords to either rent to a high risk tenant face the proposition of leaving the apartment vacant. But perhaps there is another option that has been overlooked.
In a recent event our office sponsored, we met a gentleman with a rather unique business. He insures risky tenants. When a tenant with a less than perfect credit rating or eviction history wants to get an apartment, and landlords do not want to take the risk, the tenant can pay the business a rather modest fee to essentially write an insurance policy. In the event that the tenant default s in the lease, the landlord still gets paid, and therefore has not assumed any risk. The company calling themselves “Insurent” has insured thousands of tenants throughout New York State and is now in the process of expanding their practice into New Jersey. Offering a variety of services focused on securing the performance of tenants, Insurent enables landlords to keep their buildings full, while also guaranteeing that the landlord will not take the risk.
Finally, with the increase in the number of companies now offering rental insurance services, landlords who avail themselves of rent guaranteeing services must remember to use extra caution to ensure that they continue to employ the same uniform standards for acceptance of all applicants. Historically, income, credit worthiness, eviction history and criminal background have been the four major factors in determining whether to accept or reject a tenant. Landlords who now choose to use rental insurance programs, will now be faced with the increased challenge of developing standards that will keep them protected from discrimination claims.