Buy to let property landlords face tough time ahead on rent arrears

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With the UK still in recession property landlords will continue to face tough times in terms of collecting rents but a plan by opposition politians to re-introduced payments direct to property owners could ease the situation, it is claimed.

Local Housing Allowance (LHA) was introduced for new tenancies in April 2008 and instead of rent being paid directly to private landlords to cover housing costs it went straight to the tenants who had the responsibility to pay the landlord. In practice many failed to do so.

The National Landlords Association (NLA), the UK’s leading representative body for private-residential landlords, has argued for the scheme to be disbanded and its research shows that out of 1,000 landlords surveyed from around the UK who operate 13,000 LHA tenancies the total rent arrears accumulated by these landlords since the introduction of LHA is £4.4 million, or an average of £4,400 per landlord.

According to rental arrears and eviction specialists Landlord Assist around 150,000 tenant evictions will have gone before the courts by the end of this year and they don’t see the situation improving next year as unemployment continues to rise.

They believe that arrears will be a main concern next year, with uncertainty over interest rates adding to anxieties. ‘Landlords are less equipped to sustain non-paying tenants than they were a year ago and need to take precautionary measures to minimise the risk of being exposed to rent arrears,’ said Landlord Assist managing director, Graham Kinnear.

If the Conservative Party though wins next years election things could improve for landlords. Paul Shamplina, director and co-founder of Landlord Action, a company specialising in tenant eviction, said the recent announcement by the Conservatives they will reinstate direct rent payments to landlords for council tenants, should the tenant choose this option, could help.

‘We have seen Local Housing Allowance evictions rise by 20% in the last year and this could be alleviated if the system gave the choice to have the rent paid directly to the landlord. We have found that most tenants are happy for their landlord to get direct payment,’ he said.

Caroline Kavanagh, Group Lettings Director for Badger Holdings, parent company to Townends estate agents also welcomed the proposal. ‘Badger Holdings has always believed that there should be an option in place where a tenant can choose how their rent is paid. We experience tenants who want payment to go straight to the landlord but who are restricted to do so at present by the system,’ she said.

‘Reverting back to the old housing benefit system will give landlords a higher protection. It would have a big impact on the market as landlords will have a greater confidence with tenants on the LHA scheme,’ she added.

 

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