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Understand how bail bond insurance works

SÃO PAULO – deposit bail insurance replaces the guarantor and guarantees the owner of the urban property (lessor) the receipt of rents and charges due and not paid by the tenant. This, in turn, gains agility in the approval of your rental proposal.

Leaseback insurance is regulated by specific regulations, mainly by the Tenancy Law that defines and limits lease guarantees. The general rules of local bond insurance were established by Resolution No. 202 of 2008 of the National Council of Private Insurance (CNSP).

Among the main features is the prohibition on the same lease having more than one such insurance. It also determines that the term of validity of the insurance guarantees is the same as the lease agreement. Who pays for this insurance is the tenant, whether individual or legal.

What types of real estate can the local bail bond insurance contract?

What types of real estate can the local bail bond insurance contract?

  It is a service that can be hired for rentals of residential, commercial and non-residential urban properties (offices, offices, etc.). Tenancy insurance exempts the tenant from having to seek a guarantor and prevents the applicant from embezzling their savings to raise money equivalent to three or more months of rent, assuming that a deposit (collateral) is required as collateral for the lessor.

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This type of insurance, however, does not exempt the defaulting tenant from paying what he owes. The insurer, who paid the rent and charges to the owner of the property (insured), will seek reimbursement of the total that has spent, charging the debt of the defaulting tenant. The charge may be legal, inclusive.

Is the bond insurance a guarantee of approval of the candidate to rent the property?

Is the bond insurance a guarantee of approval of the candidate to rent the property?

No. The proposal for the local bond insurance may not be approved if the applicant has, for example, the name inscribed in a credit protection institution. Another reason for refusal is when the insurer evaluates that the applicant has no ability to pay rent. The insurer’s assessment of the tenant’s registry is similar to that performed by credit institutions.

What is the income necessary to approve the registration of the future tenant?

What is the income necessary to approve the registration of the future tenant?

Generally the renter candidate must prove monthly rent equivalent to three or four times the rent amount. It is common for insurers to accept composition of income of up to three people who come or not to live in the property.

What are the advantages of local bond insurance in relation to other options?

What are the advantages of local bond insurance in relation to other options?

A business is only good when it serves the interests of all parties. In the case of lease surety insurance, both tenants and landlords and real estate have advantages.

Advantages for the tenant

Advantages for the tenant

• Avoid the embarrassment of seeking a guarantor.
• It gives more agility in the approval of the contract.
• Prevents the immediate payment of the deposit (deposit equivalent to three times the monthly value of the rent).
• Installment of the premium.
• Progressive discounts on insurance renewals.
• Some insurers offer extra coverages for the tenant, such as discounts on carriers for the move and 24-hour assistance services, such as small repairs and cleaning of water tank, among others. Advantages for the owner
• More rapid reception of the rental of the property guaranteed by insurance, in case of delay or default of the tenant, without having to wait for the conclusion of any legal proceedings.
• Effective guarantee of the lease until the end of the contract, with the certainty that it will receive the rent and charges, in case the tenant does not pay.
• Elimination of the risk of professional guarantors.
• Additional coverage of physical damages to the property, fine for contractual termination and complete painting of the property, among others.
• Possibility of legal assistance from the insurer.

Advantages for real estate

Advantages for real estate

• Exemption of the registration analysis, which is now made by the insurer. This also eliminates the risk that the real estate company takes when approving the registration.
• Several insurance brokers specializing in this field already perform the job of assisting the tenant candidate, filling in the registration form, collecting documents and sending documentation and analysis to the insurer. By taking on this job, the insurer eliminates the cost that the real estate would have in carrying it out.
• Possibility of legal assistance from the insurer, if necessary.
• The certainty of receiving the rent guarantees the regularity in receiving the administration fee of the property.

In addition to the local bail bond insurance, what are the other options to guarantee rent payment?

In addition to the local bail bond insurance, what are the other options to guarantee rent payment?

The more traditional ones are, first, guarantor, and then deposit (or collateral). Although the guarantor still prefers it, the demand for insurance is increasing. Among the causes of this trend are the difficulty of obtaining a guarantor and the restrictions made by real estate owners who do not like the possibility of receiving late rents only after the conclusion of eventual eviction action of the tenant.

In addition, changes in the Tenancy Act also discouraged accepting guarantor because they allow him to withdraw from the commitment in certain situations. The deposit (or deposit), in turn, may be made in real estate or money deposited in a savings account or capitalization or investment fund, as provided by the Tenancy Law (Law 8,245, 1991, as amended by Law 12.112, of 2009 and Law 12.112.

The deposit also leaves reluctant homeowners who assess three months of rental warranty insufficient time in the event that a lawsuit is required to repossess the property.

Of the alternatives for guaranteeing the receipt of the rent, which one tends to have increasing acceptance?

Of the alternatives for guaranteeing the receipt of the rent, which one tends to have increasing acceptance?

Locational bond insurance gradually presents an increase in participation in the rental market, with a consequent reduction in more traditional modalities. Real estate managers, mainly from large urban centers, advise owners, their clients, to opt for local bond insurance.

Some real estate companies, including, only work with the insurance to guarantee rent receipt. The deposit (or deposit), despite being the second most used option, is seen as an insufficient guarantee to cover losses of eventual default of the tenant. The amounts deposited correspond to a maximum of three months of rent, while the judicial deadline for an eviction action is much higher. The guarantor, on the other hand, is increasingly difficult to find.

In addition to people avoiding bail for friends and relatives, there are many requirements for accepting a guarantor. Among them is the presentation of more than one residential property, because if it is necessary to trigger the guarantor to honor rents not paid by the tenant, the attachment of the only residential property of the guarantor is unconstitutional, according to a decision of the Federal Supreme Court.

In addition, in order for the guarantor to be accepted, the tenant applicant must present a person who owns properties located in the same municipality in which he is going to rent. The requirement is due to operational and legal costs in case the owner has to file a eviction action for nonpayment.

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