Contentious eviction proceedings in New York City are among the most expensive globally, incurring costs between $15,000 and $50,000 per case. However, the largest proportion of these costs stems from lost rent, which is fundamentally avoidable. Tom DeRose, co-founder and CEO of PandaGuarantee, founded his company because existing guarantee services were either too slow, too expensive, or too complicated for applicants. Customer experience, for both property owners and tenants, often seemed secondary. The underlying premise is clear: the rent guarantee process must be designed to be as efficient and cost-effective as possible, with approvals for applicants within minutes, economical pricing, and a user-friendly platform connecting everything.
The $21,000 Problem
When property owners think of evictions, attorney fees and court proceedings come to mind. While these items are significant, they do not represent the greatest financial damage. The main cost factor is lost rent – the opportunity cost incurred when a flat stands vacant for months or a resident fails to pay rent. In a non-payment case in New York, an owner can easily go six months (or longer) without rental income while the case is pending in court. At $3,500 per month – the median for a studio apartment in Manhattan – this means a loss of income of $21,000, even before a single lawyer's bill has been settled. Covering the defaulted rent would approximately halve the financial damage. This calculation forms the basis for rent guarantee insurance and explains why PandaGuarantee was founded as a quick, simple, and economical option for property owners to protect themselves against rent defaults.
The year 2019 significantly changed the framework. Before the Housing Stability and Tenant Protection Act (HSTPA), landlords could demand higher security deposits from applicants whose creditworthiness was borderline. This option is no longer available. The 2019 HSTPA legislation limited security deposits to one month's rent. Although the legislation was intended to protect tenants, limiting the security deposit means that many applicants with borderline creditworthiness can no longer offer a higher upfront payment to offset their increased risk. Instead of protecting tenants, this has excluded many from the rental market. Property owners who previously used higher security deposits to accept such applicants must now find new ways to protect their revenue. Those who have not adapted their processes since 2019 are carrying a higher risk than they realise.
Challenges from Fraud and Guarantees
Artificial intelligence has significantly simplified document fraud. Digital image editing software makes it possible to create fake pay stubs and manipulate bank statements at the click of a button. Floyd Williams, a leasing agent at Mirador Real Estate, reports having seen more and more pay stubs and other documents over the years that he believed were fraudulent. He observes that such clients often withdraw from the application process once they realise that the due diligence is comprehensive. It shows that a standard check – credit report, income multiplier, reference check – is insufficient to uncover sophisticated fraud. Many property owners only recognise this vulnerability when they are in court.
The usual response to an uncertain applicant is to request a personal guarantor. This could be a parent, a relative, or another person willing to co-sign. However, this form of protection is often less effective than many landlords assume. A qualifying co-signer usually needs to earn 80 times the monthly rent – twice as much as the tenant themselves. Most candidates do not meet this requirement. Guarantors from other states are difficult or almost impossible to pursue, and their financial situation can change during the tenancy. Even a perfectly qualified personal guarantor offers merely a signed promise. Enforcing it requires another trip to court. A personal guarantee is an uncertain promise, not immediate payment.
The most effective letting processes do not just use a binary approval procedure but employ three categories. Strong applicants are approved. Applicants with signs of fraud or actual inability to pay are rejected. However, there is a broad middle ground, which includes students, international tenants, young professionals, self-employed individuals, and applicants who just barely miss the income requirement. None of them are bad tenants. They are simply difficult to assess using rigid checklists. The standard process often rejects them, leading to vacancies. For this group, an institutional rent guarantee is the appropriate solution. A third-party company issues a guarantee that covers unpaid rent for the entire tenancy. In the event of a rent default, the landlord submits a claim, and the guarantor pays. This saves pursuing a co-signer and waiting months for collection from a personal guarantor through court proceedings. The opportunity costs of lost rent make a default catastrophic. Legal costs hurt, but unpaid rent accumulates month after month while the process proceeds at the court's pace. Guarantee insurance does not prevent tenants from defaulting but stops the resulting financial downward spiral. A property owner who secures borderline applicants through an institutional guarantee and gets claims settled within a week operates a different business than someone who does not. Same city, same applicant pool, but a significantly lower downside risk. Better risk distribution tools enable landlords to accept more qualified tenants and reduce avoidable losses. $21,000 in lost rent in New York is no longer just a cost factor but a conscious decision.
