The Ministry of Justice (MoJ) has just released the official figures for landlord repossessions during the period October to December 2022 — and they’re alarming. The number of repossessions in that time has risen by 98%.
So why is this? And how can you avoid having to go through the costly and time-consuming procedure of getting your property back?
The Rise in Repossessions
The MoJ figures make alarming reading. During the last quarter of 2022, 5,409 landlord repossessions were granted, a rise of 98% on the same quarter in 2021. At the same time, there were also 20,460 repossession claims (42% up) and 733 mortgage repossessions, a massive increase of 134%.
So why is this? Matt Downie, Chief Executive of Crisis, puts it down to “The devastating impact of the cost of living crisis, rising rents and low wages”, pointing out that rents are rising at their fastest rate in 16 years, while Housing Benefit has been frozen since April 2020.
The Causes of the Problem
So, what’s driving both the rent rises and the increase in defaults, leading to repossession? As Downie implied, it’s almost certainly the fact that inflation is soaring and wages aren’t rising to match it, leaving most people with less money. In particular, huge increases in food prices are being driven by factors including the fallout from Brexit and the war in Ukraine, while energy bills are going through the roof.
This is affecting many landlords, particularly those who were operating on fairly tight margins, for whom substantial rent rises may be the only way of breaking even. Unfortunately, this is helping to push more tenants into rent default. On average, renters tend to be in a lower income bracket than owner-occupiers, making it harder for them access better energy deals. This situation is likely to get worse when the government’s energy subsidies end after March.
What Can Landlords Do?
In some cases, repossession is the only option open to a landlord, especially if they’re operating on a narrow margin. However, this isn’t by any means an ideal solution. Repossession can be a long, expensive process, and you’ll be left for an extended period with no income from the property.
If the tenant simply won’t pay, there’s little option, but most defaulting tenants desperately want to find a way to pay what they owe. In these cases, it can be more cost effective to work with them and find a way that they can afford to pay off their debt. Even if this is a compromise by which part of the debt is written off, it could mean that you’ll receive much-needed income a lot sooner than if you take the repossession rout.
Whichever option you choose, you’ll need an expert negotiator to ensure you get the best possible result in the circumstances. Give me a call to see how I can help you either repossess your property or avoid having to — whichever benefits you more.