Landlord News

Tenants Increasingly in Rent Arrears

Em Morley - January 6, 2012

Figures from a survey conducted by Templeton LPA have made for unwelcome reading for Britain’s landlords.

Tenant Arrears Tracker

Templeton LPA’s latest Tenant Arrears Tracker has indicated that the number of tenants facing extreme financial difficulty rose significantly in the last quarter of 2011. Almost 11,400 more tenants are in arrears of two months or more in comparison to the same period in 2010.[1]

Despite a seemingly low 9.3% of all rent being late or unpaid during November, the number of tenants owing two or more months rent is rising rapidly. This said, the number of tenants in severe rent arrears makes up only 2.4% of all private rented properties across England and Wales.

Two speed market

“The soaring cost of renting has created a two speed market,” remarks Paul Jardine, Director of Templeton LPA.

 

Jardine also suggests: “The overall tenant population has coped relatively well with rising rents and soaring living costs,” and it just the minority of renters “falling deeper and deeper into payment difficulties.” He does however, acknowledge that “the number of severe arrears cases is rising.”[1]

Jardine also remarks: “While the wider tenant mix has changed since the mortgage market downturn with a greater number of financially sound yet frustrated first time buyers, a growing number of tenants are seeing their job prospects affected by the UK’s economic malaise.”[1]

Evictions

Additional figures taken from the Tenant Arrears Tracker show that a greater number of tenants are being evicted from rental properties. During the final quarter of 2011, 24,966 tenants were served eviction notices, an increase of 11% on the previous year. Worryingly, evictions were up 5.4% in quarter three of 2011 in comparison to quarter two.[1]

Tenants Increasingly in Rent Arrears

Tenants Increasingly in Rent Arrears

 

More pleasingly, buy-to-let mortgages more than three months in arrears fell by 7% in the final quarter of last year, in comparison to the previous quarter. This showed a yearly decline of 17%.[1]

Jardine feels: “The growing level of severe tenant arrears has yet to filter through into mortgage payment problems for landlords.”

He observes that while mortgage rates remain low, “there has also been a change in landlords’ behaviour.” Jardine now feels that “rental income has become the most important component in an investor’s annual return.”[1]

He goes on to state: “As a result, many landlords are being less lenient with tenants facing initial payment problems, and are looking to use court orders to replace tenants quickly in expectation of finding a financially sound substitute and potentially an increased rent, given the strength of competition for rental property in many areas of the UK.”

Jardine also feels: “A growing number of landlords are exploiting higher rents to set aside slush funds for future arrears and void periods, or signing up to rental indemnity schemes.”[1]

Gloomy outlook

Looking to the forthcoming year, Jardine provides a stern and gloomy forecast. He anticipates: “Given the economic challenges the UK faces and the worsening labour market, we anticipate that both overall arrears and severe arrears will rise in 2012 and this will feed into increased tenant evictions and hamper a growing number of landlords’ ability to meet their monthly mortgage costs.”[1]

[1] http://www.landlordexpert.co.uk/2012/01/06/uk-tenants-in-financial-difficulty-is-increasing-rent-arrears-for-uk-landlords/