Insurers are experiencing first-hand rent defaults. Every day, these entities register around 300 incidents for this reason, having to financially compensate the owners who have not received the agreed rent for the lease of a property, according to various sources in the sector.
The increase in unemployment generated by the coronavirus crisis makes it difficult for many people to face the payment of rent. "The situation is getting worse as the tenant", warns the president of Avalisto, Raúl Pérez Acebo. However, this situation also has a good part for insurers, which have increased the number of policies contracted during confinement.
For example, at Avalisto sales have increased by 200% during the months of March, April and May. According to the company's own data, around 80% of these insurances against defaults are contracted by the owners, although more and more tenants are requesting information.
These insurances take over the overdue installments and, eventually, cover the rent payments during the 8 or 10 months that may be necessary to evict the tenant through the courts. Thus, the lessor is protected without the need for a guarantor. For the tenant, these policies they mean savings compared to the requirement of months of bail, that in many occasions multiply by three or more times the monthly rent that is requested for the property. In addition, they are cheaper than a bank guarantee.
The serious economic consequences of the Covid-19 pandemic the delinquencies in the payment of rent have skyrocketed from 5% to 15%, according to data from the Association of Home Owners for Rent (Asval). For this reason, insurers analyze, even more, the risk of their clients, which has led to an increase in the number of 'scorings' required to issue a policy.
Most defaults occur in the housing market. They have also been observed in offices and commercial premises, but in these cases the owner is much more benevolent because, in the current situation, with the telework boom and the closing of thousands of businesses, it is very difficult to find a new tenant. Therefore, they prefer to forgive the rent for a few months than having to deal with an empty property.
AID TO OWNERS
The insurance sector is also concerned about the tiny percentage of tenants that have shown interest in requesting the rent moratorium that the government decreed in the first weeks of the state of alarm (only 3%, according to Asval). Furthermore, it understands that the granting of loans with guarantees from the Official Credit Institute (ICO) should be granted directly to the owner.
This is also one of Asval's main requests, which foresees a broad rejection of these grants for fear of increasing debt levels in a situation of so much uncertainty regarding employment. The most vulnerable tenants "do not want to get into further debt at a time when they have seen their incomes have been reduced significantly when entering an ERTE or losing their job," Asval CEO Beatriz Toribio pointed out in early June.
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