Rent arrears are at their lowest since spring 2010, according to a survey by the National Landlords Association, with void periods in private residential property also falling.
Last year nearly half of landlords said they had tenants in arrears but that figure had fallen by nine points to 41% in the most recent survey, published in March.
Strong demand from tenants meant only a third of landlords said they had empty properties, down 13% year on year, and with the average period of a void now 60 days compared with 69 in early 2012.
There is a North-South divide, with 54% of landlords in north-east England reporting voids compared with 20% in London.
Arrears can force landlords out of the market. In the 2012 survey, 16% of landlords with one property were making a loss on their investment.
So it may come as a surprise that the NLA and other advisers say that starting possession proceedings must always be a last resort in tackling arrears.
David Salusbry, the chairman of the NLA, said: “Landlords should work with their tenants to minimise the impact of financial stress. 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.”
Strategies for preventing arrears
The association’s advice for landlords experiencing arrears include strategies for preventing them occurring in future.
- Background checks: carry out appropriate checks to ensure new tenants are in a position to meet their rent;
- Build a good relationship: be open and approachable. This can also help when tenants decide to move on, as they will let you know their plans and enable you to keep voids to minimum;
- Take a deposit: by law, a deposit must be protected in one of three government licensed schemes (Scottish law is slightly different but deposit protection is legally required).
Indeed, Furley Page Solicitors, a leading law firm in London and south-east England, has a lengthy advice sheet for landlords to ponder. Not unnaturally, their first tip is: “We recommend that a landlord seeks legal advice before entering into an agreement with a tenant because the legislation is complex, the obligations on a landlord can be daunting and the fines can be substantial if there is ever a dispute.”
One other suggestion is geared to the current financial climate: “A landlord should consider whether a guarantor to the agreement is necessary. For example if a landlord is renting to students or young professionals this is a good idea. The guarantor should be a home owner and relevant credit checks should be carried out on the guarantor prior to signing them up to the agreement.”
What to do if the worst has happened, and the rent has not been paid?
The NLA suggests:
- Work together: If a tenant is experiencing difficulties paying the rent, arrange to discuss the situation; it is important to work together to ensure an enduring tenancy;
- Be alert: If the tenant has experienced a sudden change in circumstances, work with them to check they are receiving any benefits they may be entitled to. This could resolve the situation quickly and easily.
- Set up a payment plan: If the tenant is not entitled to additional funds, work with them to arrange a short term solution such as a repayment plan or reduced rent arrangement.
- Avoid substantial debts: 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.
- Be aware of the appropriate procedure: 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. This must always be a last resort – professional landlords will favour good, sustainable tenancies over short-lived tenancies that result in periods in which their property will lie vacant.
SJ Collections has years of experience in landlord-tenant relationships and can guide you through the recovery options if the rent has not been paid.