Landlords and tenants need to work together to face growing arrears
By Emma Martin, 19 July 2018
It might seem like reports of rising rents spells good news for buy-to-let landlords looking for increased returns, but new research reveals that it might not be that straightforward.
In an economic landscape where rents are continuing to rise, but wages are not, mounting tenant arrears are being reported.
Costing UK landlords up to £900m annually, arrears are bad news not only for tenants, but also landlords who are landed with chunks of missing revenue.
Data from Your Move shows that in the first quarter of 2018 the number of tenants in arrears rose four months consecutively, equating to 9.4% of all tenants facing financial issues. Additional information from Belvoir shows that a fifth of its offices saw at least four to 10 tenants in arrears between January to March.
Founder and chief executive of RentalStep, Mike Georgeson, commented: “Rent arrears are a real and serious issue for the nation’s landlords and they need to do everything in their power to protect themselves from being seriously affected.”
He added, “Many industry commentators predict that rents could rise as a result of the incoming ban on tenant fees. Landlords need to be aware of how this could impact on rent arrears and prepare accordingly. Making sure you let to tenants who have been fully referenced and credit checked is absolutely vital. Of course, you’ll never be able to completely avoid rent arrears as any change in circumstance could cause a tenant to miss a payment, but you must do everything you can to make sure you partner up with reliable renters.”
Whilst tenants cannot be blamed entirely for rent arrears due to stagnant wages and ballooning rents, it is important for landlords to make sure that proper referencing is carried out at the start of a tenancy to ensure a tenants previous rental history and minimise risk.
As Georgeson notes, it is predicted that letting fees bans will see rent rises dished out to tenants in order to make up for bruised bottom lines.
It is for this reason that it is important for landlords and tenants to work together to try and reduce the chances of rent arrears snowballing. For landlords with long-term tenants, it is advisable to discuss openly rent rises prior to implementing them without warning. Similarly, tenants should feel comfortable with discussing any problems they may have paying rent so arrangements can be made instead of falling into arrears.
As the rental landscape becomes more challenging for tenants, and potentially more valuable for landlords, it is crucial that open conversation is welcomed to make the sector as comfortable it can be for both sides.
Do you need property management advice? Our friendly team are always on hand to answer any questions you might have. Get in touch today to find out how we can help you!
The tenancy deposit cap has been reduced to five weeks rent
Will a current trend of rent reductions last into the future?
The government has proposed a new Housing Court to streamline dispute resolution in the rental sector - what benefits will it bring?
Energy efficiency standards are improving and landlords need to be aware of their responsibilities
The rise of short holiday lets seems to be affecting rents in the UK