Rent Guarantee Insurance in France (GLI): A Pillar of Security for Property Owners

Rent Guarantee Insurance in France (GLI) has become an essential tool for property owners in response to the evolving rental market and the increasing risks of non-payment.

Historical Background: Why Did GLI Become Necessary? 

The need for protection like Rent Guarantee Insurance stems from the socio-economic changes of the past decades. Starting in the 1970s, rising real estate prices and increasing costs made renting out properties more risky for owners. At the same time, economic instability, with periods of increased unemployment and job insecurity, made some tenants more vulnerable, thereby increasing the risk of non-payment.

In this context, owners increasingly faced late payments or unpaid rent, with legal recourse being long and costly. Traditional insurance did not cover this type of risk, making it urgent to find a solution to protect real estate investments. This is how GLI was developed, meeting a growing need for securing rental income.

How Does GLI Work? What Are the Conditions? 

Rent Guarantee Insurance works as a policy taken out by the property owner (or their representative, often a real estate agency) to protect against the risk of non-payment by the tenant. In practice, if the tenant fails to pay the rent, the insurance covers the owed amounts, allowing the owner to continue receiving income even if the tenant does not pay directly.

In addition to covering unpaid rent, some GLI policies offer additional protections, such as covering legal costs to evict a tenant in the event of prolonged non-payment or covering property damage when the tenant vacates.

For GLI to cover non-payment, there are a few conditions to meet:

Condition 1: As soon as you notice a payment delay from your tenant, you must send a reminder letter. 

Condition 2: If you receive neither a response nor payment from your tenant within 15 days, you must send them a formal notice by registered mail with acknowledgment of receipt. 

Condition 3: If the debt is not recovered, you can then submit a claim to your insurer within the period specified in the contract.

Typically, compensation is provided from the month following the first missed payment. However, rent guarantee insurance is retroactive, meaning you will be compensated for all missed payments.

All these steps must be carried out by you unless your property is managed by an agency. At Winter Immobilier, we have extensive expertise and also offer rental management services. We manage your properties from tenant entry to exit and are present in case of problems. Our experts coordinate with our lawyer and bailiff and jointly, with precision, carry out all the mandatory steps to avoid missing the deadlines for initiating legal proceedings.

What Documents Do I Need to Provide for My Tenant Application? 

At Winter Immobilier, when you submit an application following a visit, it must include certain essential documents, depending on your professional situation.

Indeed, whether you are a student, employee, retiree, or self-employed or business professional, the required documents will vary.

For a Student 

You must provide your ID and a bank account statement (RIB). You must also provide a student card or enrollment certificate along with proof of residence. You will also need to submit your guarantors' documents.

For an Employee 

The basic requirements are the same, i.e., ID and bank account statement, plus the last three payslips. You will also need to provide your employment contract and the latest tax notice, as well as proof of residence.

For a Retiree 

We need your ID and bank account statement, along with the latest pension statement, your latest tax notice, and proof of residence.

For Self-Employed and Business Professionals 

You need to provide your ID and bank account statement, along with your last three payslips, an extract from the commercial register (Kbis), a copy of your professional license, the last two accounting balance sheets, the latest tax notice, and proof of residence.

Application Selection: How Does GLI Evaluate Tenants? 

One of the most critical aspects of GLI lies in the selection of applications. Insurance companies typically impose strict criteria for accepting a tenant under the GLI scheme. These criteria often include:

• A stable net income: The tenant must generally prove an income at least three times the rent amount.
• A solid employment contract: Tenants with permanent contracts (CDI) or civil servants are often preferred as their employment is considered more stable.
• A good credit history: The tenant should not be listed in the national register for personal credit repayment incidents (FICP).

Applications are thoroughly reviewed to minimize the risk of non-payment. If a tenant does not meet these criteria, it is likely that the owner will not be able to subscribe to a GLI, which may influence their tenant choice.

Impact of GLI on the Rental Market 

GLI has had significant effects on the rental market. On the one hand, it has allowed many property owners to rent out their properties with peace of mind, knowing they are protected against financial risks. This has helped stabilize the rental market by reducing the number of vacant properties due to fear of non-payment.

However, GLI has also introduced a stricter selection of tenants. Tenants who do not meet the stringent admission criteria may find themselves excluded from the private rental market, especially in high-demand areas. This can particularly affect young professionals, precarious workers, or the self-employed, who struggle to provide sufficient guarantees.

As a result, some segments of the population increasingly turn to alternative solutions, such as bank guarantees or co-signers, or even to social housing. This situation may exacerbate inequalities in access to housing and increase pressure on social housing.

What Is the Future of GLI? 

Rent Guarantee Insurance has become an indispensable tool for property owners who want to secure their rental investment. While it has brought much-needed peace of mind in a sometimes unstable market, it has also contributed to stricter tenant selection, with repercussions on housing access for people with modest incomes or atypical professional situations. In a context where securing income is paramount, GLI will undoubtedly continue to play a central role in the French rental market, with significant challenges for both property owners and tenants.

If you are considering renting out your property in the Nice area, our article on the regulation of seasonal rentals in Nice might also interest you.