Weakening economic conditions in the UK mean that the private property rented sector is seeing an increase in tenant arrears.
Almost half, 49%, of landlords have experienced rent arrears in the last 12 months, according to the latest survey conducted by the National Landlords Association (NLA).
On top of this the issue of potential arrears is becoming a worry. Some 37% of landlords are worried about instances of arrears in the months ahead.
According to the research, a typical NLA member landlord, with an average portfolio of 12 lettings, has four tenants in arrears and the average arrears owed by tenants is £2,363. As might be expected, landlords with larger portfolios have greater amounts owed to them.
Arrears problems are also affecting small scale landlords, that is landlords with one letting, and accidental landlords who have rented their house as they cannot move in the current climate.
These types of landlords make up a large proportion of all landlords. The survey found that 16% of landlords with one letting are making a loss on their investment.
‘It is a sign of the difficult economic conditions that so many landlords are experiencing rental arrears. In these circumstances, landlords should work with their tenants to minimise the impact of financial stress,’ said David Salusbury, NLA chairman.
‘Short term instances of arrears can often be resolved with a sensible repayment plan or a temporary reduced rent arrangement. It is in landlords’ best interests to help tenants through tough financial times where possible,’ he explained.
‘Landlords who work collaboratively with their tenants towards sustaining the tenancy for the long term will encourage prosperous tenancies. It is professional and collaborative working that will help ensure the private rental market remains a promising investment opportunity, in turn helping to bring the economy back to an upward trend,’ he added.
The NLA advises landlords to carry out the appropriate tenant checks to ensure they are in a position to meet their rental commitment and when meeting new tenants to be open and approachable.
If a tenant is experiencing difficulties paying their rent, it recommends arranging to discuss the situation as it is important to work together to ensure an enduring tenancy. Also if the tenant has experienced a sudden change in circumstances it suggest working with them to check they are receiving any benefits they may be entitled to as this could resolve the situation quickly and easily.
If the tenant is not entitled to additional funds it is worth trying to arrange a short term solution such as a repayment plan or reduced rent arrangement. But landlords should avoid substantial debts and if problems with payment continue despite a short term arrangement, it may be appropriate to negotiate bringing the tenancy to an early end in order to avoid accruing significant debts.
In situations where the tenant has failed to meet their rental payments for two months, the landlord is entitled to issue a Section 8 Notice to initiate possession proceedings.