‘Severe arrears’ among tenants an increasing problem for landlords

As if any more evidence was needed of the ever-heightening financial insecurity faced by many landlords in recent years that has made bespoke financial products like Advanced Rent’s (http://www.advancedrent.co.uk) own Rent Guaranteed popular, new figures show a worsening epidemic of “severe arrears” among UK tenants.

According to the Tenant Arrears Tracker of LSL Property Services, the first quarter of 2013 saw 94,000 tenants more than two months behind on payments, which is an increase of 4,000, or almost 5 per cent. This represents 2.3 per cent of all of England and Wales’ renters. The statistics buck an earlier trend of improvement. Although 2012 had largely seen about 50 per cent more severe arrears than in 2011, the later stages of the year saw a significant improvement in this figure, with 14.5 per cent fewer cases in the final quarter.

LSL said that the figure for severe arrears over the last 12 months now exceeded the long-term average by 20 per cent and that a record figure had also been recorded for eviction by court orders, being 10 per cent above that of a year earlier. The 25,286 tenants facing eviction notices in the last quarter of 2012 represented a 5.7 per cent increase on the previous quarter.

Paul Jardine, director at the Templeton LPA property receivers that are part of LSL, commented: “Household finances are feeling the impact of spiralling costs, particularly energy bills, which were recently predicted to grow by an average £214 this year. And wallets are under pressure from the other side.

“According to the ONS, wages are creeping along at 1.2 per cent annual growth, well behind a rebounding rate of inflation. Many tenants have finally pulled their finances back together after the strain of the festive period. But for a significant minority the situation is actually much worse than three months ago, and this is reflected in the most severe tenant arrears.”

Although the fact that more tenants are encountering severe difficulties is hardly good news for buy-to-let landlords, there was an improvement in the number of tenants only a little behind on rents. LSL’s most recent Buy-to-Let Index shows a fall in overall tenant arrears in February, with the 7.4 per cent of all unpaid or late rent being the lowest since November last year.

Templeton added that buy-to-let landlords were also benefitting from lower buy-to-let mortgage rates as a result of the Funding for Lending Scheme of the Bank of England. According to Council of Mortgage Lenders data, buy-to-let mortgages that are more than three months in arrears were reduced in number by 20 per cent in the final quarter of 2012 compared to the final quarter of 2011.

Nonetheless, financial pressures remain very real for many tenants and landlords alike, with the latter likely to appreciate a reliable means of receiving their rent on time, every time – or even in advance. Get in touch with Advanced Rent (http://www.advancedrent.co.uk) now to learn more about our rent guarantee scheme. 

Editor’s Note: Advanced Rent (http://www.advancedrent.co.uk) are represented by the search engine advertising and digital marketing specialists Jumping Spider Media. Email: info@jumpingspidermedia.co.uk or call: +44 (0)20 3070 1959 / +34 952 783 637.