A call has gone out for agents to offer extra support to landlords in the coming months as arrears may well creep up thanks to the Coronavirus crisis.
A new report by rental payment automation platform PayProp, using data from letting agencies across the UK, shows that four out of five have seen the share of tenants in arrears grow since March.
The PayProp report reveals that following a big jump in April, the percentage of tenants in arrears has climbed to over 15 per cent now.
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.
“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” says Neil Cobbold, chief sales officer at PayProp.
“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” he adds.
“It's therefore hugely important that letting agencies are on hand to help their landlords deal with rent arrears and associated issues.”
Cobbold suggests that 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 - as recommended in government guidelines issued early in the pandemic period.
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 suggests.
“Many landlords have been very flexible in agreeing 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.”
With evictions banned until the end of August - and possibly beyond if the government issues a further extension - there may well be a court backlog to clear past possession orders, plus an additional ‘queue’ for newer orders.
“It's important that tenants who are having financial problems are advised to seek support so they can pay as much rent as possible” Cobbold says. “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 repayment schedules with tenants struggling to pay rent” he adds.
“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.”
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If any tenant continues not to pay, or has arrears, will. in my mind, be evicted as soon as the process starts up again.
No pay, no stay. Get out of MY house.
This isn’t the right attitude to take right now! Landlords and Agents should be working together to support tenants who have fallen into arrears because of COVID-19, especially if these tenants had a positive track record before hand. That’s why I believe that for once, the Government have done the right thing by demanding at least 6 months notice for section 8 / 21 evictions.
Trouble is even if a LL obtains a PO on August 24th it will still take about another year to achieve eviction.
Most LL won't achieve a PO for at least another 3 months from August.
Rent arrears will easily be over a years worth.
No tenant will be paying them.
Unless LL are able somehow to cover mortgage payments for about another year with no rent then they will be stuffed.
I predict many repossessions and LL bankruptcies as I simply can't see banks deferring mortgage payments for over a year and a half.
Tenants know they can get away with not paying rent with very little likelihood of LL doing anything about it.
Of course many tenants won't even bother waiting to be evicted as they will simply vacate once the furlough scheme has ended and return to the parental home as many will be redundant.
There is going to be a massive reduction in tenant demand.
Great referencing at the start by the Landlord or Agent can help stop rent arrears before it starts. Many good tenants will be desperate to pay of their arrears as soon as possible but we have to have a little time and patience to help them clear it while balancing the Landlords mortgage. After all, 1 In 6 working adults are now unemployed or about to be made redundant.
Another advertorial. Good agents will already be doing this and keeping records of arrears etc so what he is really suggesting is that agents spend money with his firm. Does Cobbold also visit his grandmother and advise her on the best way to suck eggs?
Classic needs based sales to be fair. Hightlight a problem that could exist, make it sound complicated and scary as hell, and then leave the door wide open to offer to fix it for them. Agents have been doing this to Landlords for years!
Yes good agents will be doing it, but there are plenty who won't, who dont know how, or who don't want the risk, who Neil is hoping to get a call from. Numbers game.
Yet more reasons for small landlords to get scared out of this business.
Yep it makes little business sense having say 10 mortgaged properties with the risks from rent defaulting tenants compared to having one very lightly mortgaged or even none at all property.
The net return would be the same from one unmortgaged property compared to 10 mortgaged ones.
Yes you miss out on potential multiple property CG but to keep that gamble going means LL being massively at risk from their multiple of mortgaged rental properties.
This CV19 process has proven that tenants will stop paying rent as soon as excuses are available.
Now tenants know that Govt will prevent their LL from evicting them in future pandemic circumstances.
Being a leveraged LL is a very risky business.
Being an unmortgaged or very lightly mortgaged LL is a far more efficacious business model.
It just means that LL have to accept the leveraging to the maximum is now very risky business model.
If LL wish to continue with such a precarious business model that is their lookout!!
This CV19 issue as highlighted the propensity of tenants to be feckless and stop paying rent as soon as they are able.
Govt is even assisting that fecklessness.
The CV19 issue is a shot across the bows of leveraged LL.
They would do well to consider very carefully whether the fully leveraged rental business odel is a wise one.
Personally I doubt it.
More can certainly result in less!!!
Or find a good agent!
I'm afraid there are no certainties as far as rent paying tenants are concerned.
Certainly LL will be very choosey with tenants.
Personally I won't be taking on anyone who works in hospitality.
A Govt worker is even more reliable than one with RGI.
Personally I will be taking full note of all those who were able to continue in full employment.
Anyone involved in the food and food transport business for example will be good solid tenant prospects.
I personally could not afford rent defaulting.
Fortunately my Ryanair cabincrew have been paid basic wages.
Without them paying I would now be bankrupt.
I simply cannot continue with such risks.
I intend therefore to downsize to the point of having no normal rental properties.
No way could I sustain mortgage payments etc. without rent.
Looks like shelter will be responsible for homeless tenants and landlords..sadly the perfect storm has been brewing for years....
Yep I don't think anybody is really admitting it yet but I'm sure this eviction ban really is the last straw for many LL.
There have been so many last straws but I believe this latest one really is the last straw!
LL have finally seen that Govt is really prepared to sacrifice LL businesses for electoral expediency.
It could easily have done as the Spanish Govt did and pay rent directly to LL BEFORE giving any remaining amount of furloughed wages to the tenants.
Instead it came up with the solution of LL having conversations with their tenants to arrange some sort of payment plan!!!!!!!!!!
What are they for real!!!!!????
Conversations and potential payment plans don't pay the monthly mortgage payments!!!!
50% of the PRS relies on rent to pay the mortgage.
Many of the other 50% of unmortgaged LL rely on rent as their income and are prevented from even applying for UC as they are all considered to have assets in excess of £16000.
Make no mistake the UK Govt has hung UK LL out to dry!!
LL would therefore do well to consider adjusting their business model factoring in similar future Govt actions.
Govt has finally shown their true colours.
Spain have shown the sensible approach but this Tory Govt just can't make the ideological leap to protect LL from the effects of this CV19 issue.
Even more bizarre is the Spanish Govt is an avowedly Socialist one and yet they have helped private LL to keep tenants housed with tenant rent being paid by Govt.
The supposedly Tory Govt isn't paying rent directly.
It seems the Tories have morphed into something even more extreme than Momentum Labour!!!
If Spanish Socialists see nothing wrong in assisting LL with rent where tenants cannot pay due to the CV19 issues then why can't the Tories!?
It is clear now more than it ever was that Govt seeks the destruction of private LL.
LL need to be very mindful of what has occurred and consider very carefully whether carrying on the same old way is a risk worth taking.
I have just missed bankruptcy by a smidgen!!
Fortunately my Ryanair cabincrew will be resuming flying.
They did all pay they rent but it was a damn close run thing.
Plus I had to ignore all Govt requirements to stay socially distant etc.
I had to move new occupants in.
Had I not done so I would definitely be bankrupted.
The scandalous Govt behaviour towards LL in this CV19 crisis really is the last straw.
I'm convinced there will be a massive shrinkage in the PRS as a result of all these latest events and we haven't yet had the AST and S21 abolished yet!!
It does seem that LL are like the proverbial wibbly-wobbly man toy.
But this is one occasion where LL won't bounce back.
They will be looking to get out of Dodge ASAP!
I suggest many LL will converting to lodgers.
They will be staying once per month in their multiple residential homes to maintain lodger status of the occupants.
I predict the need for LA will massively decline as LL adjust their business models.
Gonna be tough times for tenants as many LL sell up.
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