Investing in residential rental property in Luxembourg is a good way to prepare for retirement or to build up your assets. This investment can prove to be a very profitable operation in a Luxembourg property market that is very dynamic. With a growing number of residents and a property supply that is struggling to absorb the country's increasing population, there is a demand for rental property. Proof that investing in real estate is always a safe bet.

The success of a rental project depends above all on the rents generated and received.
In this respect, and to protect you from any real estate disappointment, insurance for landlords is offered by insurers and banks. This is called unpaid rent insurance. Because, even if unpaid rent is not very common, it does exist, and can turn your project and your dreams into a financial abyss.

What to do in case of unpaid rent?

Unpaid rent is a landlord's worst fear. The money stops coming in, and you are left alone to pay the mortgage repayments and utilities. These extra expenses can put a strain on your budget. These circumstances then become very complicated to manage and you often find yourself helpless in such a situation.

Advice and steps to take:

The first thing to do when a rent has not been paid is to contact the tenant directly to find out the reason for the late payment. The problem can be resolved quickly if it is an exceptional event. This is called an amicable solution.

In the event of several non-payments, you can invoke the rental guarantee.
When the lease is concluded, the landlord may require the payment of a rental guarantee (this rental guarantee may not exceed 3 months' rent).

The rental guarantee can take different forms:

- a sum of money paid in cash to the owner,
- a bank guarantee,
- a rental guarantee provided by the State.

The rental guarantee is intended to guarantee the payment of rent, rental charges and any damage to the rented premises.
At the end of the lease and after the last statement of account has been drawn up, the landlord will return the rental guarantee to the tenant if he has no claims. If any rent or charges remain unpaid, the landlord may deduct them from the amount of the security deposit.

Finally, if unfortunately this problem becomes recurrent, the rent has not been paid for several months and no amicable solution can be found, the only possible recourse is to the courts. This procedure is generally long and costly and does not guarantee the recovery of unpaid rent.

In order to avoid this scenario, unpaid rent insurance is aimed directly at landlords, with a dedicated offer that takes into account rental risks.

Unpaid rent insurance

This insurance protects you from the main risks and ensures that you are compensated in the event of unpaid rent.

Of course, whether you are insured or not, the choice of tenant will play a major role.
An insurer will ask you to monitor and check the financial status of prospective tenants in order to insure you. In other words, your tenant will have to be solvent and present only a minimum financial risk (amount of salary, permanent employment in particular).

So this is one of the tenant eligibility requirements for you to be covered by the insurance. Although, again, these conditions naturally apply when renting out a property.

This type of insurance is ideal for protection against unscrupulous tenants, but also for dealing with the risks of "life". After all, no tenant is immune to the loss of a job or unforeseen financial difficulties.

This type of insurance offers four types of cover:

- Unpaid rent
- Damage and deterioration
- Premature departure of the tenant
- Litigation costs

Not all of these guarantees are systematically included in unpaid rent insurance. They must therefore be taken out as an option if you want to be covered for all risks.

These guarantees also provide for compensation ceilings and time limits above which your insurer can no longer pay.

Note that this cover does not apply to seasonal lets. The lease must be for at least one year.
However, for shared accommodation (always for a minimum of one year) the insurance can be applied.