Some constraints may hinder non-residents seeking a rental property in France, such as having a guarantor. Thinking that this need for a personal surety was a failure that was detrimental to all parties in a real estate investment, our interlocutor launched The Guarantree. This consideration allows homeowners to protect their rental income and reduce their risks. Mike McDorman, the leader of The Guarantree presents us how this coverage works for unpaid rents.
Can you introduce The Guarantree ?
The Guarantree is an institutional rent guarantee insurance, fully backed by our partner AXA France. Traditionally, landlords and real estate agents have required renters to have a French cosigner, or guarantor, to qualify for a lease. Lack of a guarantor meant extreme difficulty finding an apartment, even for otherwise highly-qualified renters. The only other possibility in most cases was that the landlord could pay out of pocket for rental default insurance. Our solution was to collaborate with AXA to create a reliable, institutional guarantor for renters who don’t have one. This actually makes safer and easier for landlords, renters and agents alike.
The service we provide is really two-fold: First, we, together with AXA, guarantee 100% of landlords’ rental income against tenant default, but unlike with traditional rental insurance, our coverage comes at no cost to the landlord. Second, the guarantee that we offer helps prospective renters become the most attractive tenants on the market, allowing them to qualify for the apartment they actually want. Additionally, real estate agencies love us, for the simple reason that we make their jobs easier, and we love them back, since those relationships translate to faster apartment searches for our clients.
But to me, the beauty of The Guarantree is that landlords, tenants and real estate agents all derive a real benefit from us relative to their respective priorities. Landlords can greatly increase the security of their investment at zero cost. Renters, especially those without deep networks in France, can easily attain a home they love, even in highly competitive markets like Paris and Lyon. And agents can more quickly identify the safest renters on the market and earn their commissions. In that way, we help all sides attain their goals.
What was the main contraints that led you to launch this guarantee system ?
When I first moved to Paris as a graduate student in my twenties, I personally experienced the difficulty – which felt at times like an impossibility – of attaining a lease for lack of a personal guarantor in France. Then several years later, when I moved to Paris a second time after law school, I encountered the same difficulty. I was teaching law in Paris and Sciences Po and the Ecole Normale Supérieure, I saw that many of my students and colleagues – both French and foreign alike – were all facing the same problem!
It dawned on me that the requirement of a personal guarantor was actually an inefficiency that was negatively effecting all parties. It made sense that a reliable central counterparty could more efficiently protect landlords’ rental income, thus reducing their risk, which would in turn make it easier for renters to find the right home, so I set out to build it.
It was tough for the first couple of years, because, being at that time a brand-new company, The Guarantree didn’t have the reputational weight in the country to provide the level of comfort that landlords and agents needed. I knew the idea was sound though, so to counter our newness and show our commitment to earning a reputation for long-term reliability, I approached AXA about teaming up to create the product together; and they jumped onboard. We’ve been partnered now for two years and counting, and that partnership has really opened the door to the serving the entire country, since AXA is so highly respected in the industry.
What are the benefits of your solution ?
Well for landlords, the cost of our guarantee is hard to beat: it’s free, so that’s a great advantage over every other solution on the market. They’re covered for up to 50,000 € for tenant default, 10,000 € in property damage and 4,000 € in legal costs, so it’s an exceedingly attractive proposition from the landlords’ perspective.
For renters who purchase our guarantee, obviously there is the greater choice and acceptance that comes with having a premium guarantor, but we’ve evolved into a combination apartment hunter / personal assistant service as well. For example, many of our clients are foreigners, and so are faced with linguistic and cultural hurdles with landlords and agents that we’ve become much more adept at handling. That human element of the service is huge for renters, and as we’ve grown, we’ve developed deeper relationships with the real estate agency networks throughout the country. This is also a major advantage for our clients, since our agency partners privilege our clients immediately over other prospective tenants. They do so, because they understand that AXA is effectively the best possible guarantor one could have in the country.
How to suscribe to your offer when you are a tenant ? Can everything could be done online ?
Yes, the entire sign up process can be handled online at www.theguarantree.com. We like to make phone contact rather early in the process with our clients, to get a sense of where they are in their search and what they’re looking for. Then the hunt is on. It’s a great feeling when a client secures a place they love.
…And for the owner, is there a specific requirement for him to fulfill to be elligible to your warranty system ?
The only condition is that the monthly rent should be below 3100 € per month. Otherwise, we handle leases nationwide, both furnished and unfurnished. Our guarantees run with the lease and automatically renew when the lease does.
What is the cost of your solution ?
Our typical fee is 3.5% of the annual value of the lease, and it’s paid by the renters at the time of lease signing.
Can this warranty system apply to foreigners ?
Yes, and in fact, foreigners make up a significant percentage of our clientele, since they often lack the sort of close family contacts in the country that locals can often rely on to get through the apartment search maze. We serve many French clients as well though, for all kinds of reasons..
In which geographical areas is it possible to use The Guarantree ?
The Guarantree is available for apartments throughout all of France.
The Guarantree France
115, rue Saint Dominique