Rent arrears at highest level in 4 years
Landlord possession claims in England and Wales are rising as rent arrears increase to their highest level in four years, it is claimed.
In the second quarter of 2012, there were 25,422 landlord possession claims that led to an order being made on the seasonally adjusted basis. This is slightly higher than in the first quarter of 2012 and continues the upward trend since 2010, according to the ggovernment’s quarterly Court statistics.
Landlord possession claims leading to orders made in England and Wales are up by 8% year on year to the end of the second quarter of 2012.
Areas with particularly big rises include Gloucestershire up by 29%, West Sussex up by 20%, and Hampshire up by 29%. Some towns have also seen big rises such as Bournemouth up 30% and Croydon up by 28%.
The rate of growth in the number of tenants in severe arrears is slowing, but nevertheless rose by 1.6% in the third quarter of this year. There are now 99,000 tenants in arrears of two months or more, the highest since 2008 and 15% more than last year, according to figures from Templeton LPA, a specialist practice of LPA Receivers and part of LSL.
Tenants in severe arrears represent 2.5% of tenancies in England and Wales. Although severe arrears cases climbed steadily last quarter, overall tenant arrears fell slightly in August, with 9% of all rent late or unpaid, the first improvement in this measure in three months.
Despite the steady growth in severe tenant arrears so far this year, there was a slight reduction in the number of tenants who faced eviction through court order on a quarterly basis.
In the second quarter of 2012, 25,422 tenants faced eviction notices, a quarterly fall of 6% compared to the previous quarter, reversing the previous 6% quarterly increase. However, evictions remain 8% higher on an annual basis.
‘We have seen a sharp increase in demand for rent guarantee insurance as landlords and agents look to find ways to protect their rental income. It is clear that this problem is not going to go away and we expect tenant arrears cases to continue climbing during the remainder of this year,’ said Michael Portman, managing director of LetRisks, a specialist provider of risk management and insurance to the residential let property market.
'The double dip recession is putting huge pressure on the nation’s pockets. Rising fuel and food, unemployment and increased rents is putting tenants in difficulty. Many tenants have fallen on bad times and have no financial resources to clear arrears debt has led many agents and landlords to pursue possession only, foregoing any attempts to secure rent arrears through the courts,’ he explained.
‘For many Landlords and agents, they face better odds securing new tenant rental income than they do securing rent arrears from an existing tenant. My advice to landlords and agents is make sure that they consider the strength of the tenant when letting the property by taking out full references and to consider specific insurance through a specialist company for loss of rent if the tenant defaults and the cost of legal expenses,’ he added.
The firms tips to help minimise the risk and disruption for landlords and agents include not delaying action if the rent is late and chasing the rent arrears. It advises establishing a firm rent chasing timetable including letters before legal action, telephone scripts, serving notices etc, and making sure that that all staff are aware of these procedures.
It also says that getting the right tenant is crucial and it may help to work with a good tenant referencing partner and making sure that corners are not cut when it comes to checking procedures.
It adds that is changes to the Localism Bill that take effect next April should be observed. The firm has heard of solicitors acting for tenants on a no win-no fee basis to catch out landlords and agents if they haven’t complied with the regulations.