Landlords hit by rent arrears will need vital support from letting agents
With almost 8.5 million people renting and spending on average over 40% of their income on housing costs, it is unsurprising that more landlords are facing rent arrears – a problem expected to worsen over the coming weeks.
With the news out this morning that rents have hit record highs, newly released data from rental payment automation platform, PayProp, backs up concerns that there is trouble on the horizon as four in five agencies report seeing the share of tenants in arrears grow since March.
Landlords will need the support of letting agencies to ensure they have a comprehensive record of all arrears and communications with tenants, according to PayProp.
Increased arrears could remain a problem for months
Although UK lockdown measures have started to ease in recent weeks, several reports suggest that some tenants will continue to struggle meeting their rental payment obligations due to the knock-on effects of Covid-19.
The Resolution Foundation’s analysis of a YouGov survey of 6,000 adults suggests that approximately one in eight private renters has fallen behind with housing costs since the start of the Covid-19 crisis.
The report goes on to spell out the impact on the lettings industry. Following a big jump in April, the percentage of tenants in arrears has climbed to over 15%. The average amount owed by tenants in arrears has also grown in relation to their monthly rent, although around a third of agencies actually saw arrears reduce as tenants began repaying the amount owed by them.
Neil Cobbold, Chief Sales Officer at PayProp, comments: “After an initial surge in March when Covid-19 started to spread rapidly across the UK, heightened levels of rent arrears could persist for many months to come, despite many tenants settling some of their debt.
“Measures like the furlough scheme and Universal Credit increases have helped tenants to continue paying their rent, but payments are still less predictable than usual, and the furlough scheme is almost at an end.”
“It’s therefore hugely important that letting agencies are on hand to help their landlords deal with rent arrears and associated issues.”
Keeping digital records is a top priority
Digital record-keeping provided by letting agencies can help landlords to stay on top of rent arrears, allowing them to see how much is owed and by which tenants.
Agencies can also help landlords to create payment plans for tenants to pay back arrears over a manageable period of time. Recording those plans clearly is crucial as landlords will need to see whether or not tenants are repaying on schedule once normal life resumes.
Cobbold explains: “Many landlords have been very flexible in agreeing on temporary payment schedules with tenants in recent months. If all the information is recorded digitally by letting agents, this can help all parties to have a clearer understanding of their financial positions – and increase landlords’ chances of recouping unpaid rent.
“Keeping a record of all conversations and agreements made with tenants will also reduce the chances of payment disputes occurring later on.”
Guidance will be key as eviction pause continues
With the evictions process put on hold for a further two months, landlords will need to consider their options carefully.
The moratorium will now continue until August 23, five months after it first began – and there is no guarantee that the government will not extend it further as the end date approaches.
It has been predicted that there could be a surge in court cases after the eviction freeze ends as many court possession orders were stopped in their tracks in March. New cases may have to wait until this backlog is cleared.
Cobbold concludes: “It’s important that tenants who are having financial problems are advised to seek support so they can pay as much rent as possible. Letting agents should be familiar with the types of support on offer, such as Universal Credit and the Self-Employment Income Support Scheme so that they can communicate them to landlords.
“Agencies should continue to advise landlords to pursue the lengthy and expensive court process only after trying to agree on repayment schedules with tenants struggling to pay rent.
“While eviction will always be the last resort, letting agents’ records of payments and agreements will also provide landlords with the evidence they need should they need to seek repossession.”