Tenant evictions and arrears in sharp rises

The number of court orders to evict tenants is up 9% in the last year, and look set to rise further. The number of tenants in severe rental arrears is up by 13%.

However, the impact of tenants’ arrears has yet to filter through to landlords, with total buy-to-let mortgage arrears cases falling by 12% in the last year

According to new research by Templeton LPA, which acts as a receiver of rents for lenders whose landlords have defaulted, the number of tenants in severe financial difficulty has climbed rapidly in the last quarter.

It says there are now nearly 8,700 more tenants over two months in arrears. 

Some 74,492 tenants in England and Wales are in severe arrears – a 13% increase compared to the same time last year.

This also represents an increase of 4% compared to 71,483 in the previous quarter.

Nevertheless, tenancies in severe arrears represent just 2.1% of all properties in the private rental sector in England and Wales.

The growth in tenant arrears has been mirrored by a rise in the number of tenants being evicted through court orders.

In the last quarter, 24,170 tenants faced eviction notices – an increase of 9% on the 22,091 a year ago. But the change is not just annual. In Q1 2011, there were 5% more than in the last quarter of 2010.

Paul Jardine, director and receiver at Templeton LPA, said rising rents were helping to fuel the increase in arrears.

He said: “There’s no denying that tenant finances have been under mounting pressure in the last six months. Rents have risen consistently in the past year to a record high, and the cost of living is taking its toll.

“This is causing many tenants on lower incomes to fall further and further behind with monthly payments.

“But with demand so strong for rental properties, and rental income providing the lion’s share of annual return at present, many landlords are becoming less lenient with arrears, and seeking court orders to remove non-paying tenants before they themselves fall into mortgage arrears.”  

The increase in tenant arrears and evictions has not yet fed through into buy-to-let mortgage arrears. In the last quarter, the number of buy-to-let mortgages more than three months in arrears actually dropped by 8% compared to the previous quarter. However, at 29,400, there are still nearly three times as many buy-to-let mortgages in severe arrears compared with three years ago.”

But Jardine warned:  “The full impact of public sector spending cuts is yet to be felt, and rent rises are unlikely to slow in the immediate future.

“Tenant finances will continue to be placed under pressure, and it is crucial that landlords do not delay in contacting tenants to nip any potential payment problems in the bud as amicably as possible. Otherwise, buy-to-let mortgage arrears will begin to climb as the year progresses.”