The respite from rent rises was short lived. In February, the HomeLet Rental Index revealed that the average monthly rent for a new tenancy in the UK was £1,175 – a rise of +0.3% since January and resulting in a 9.9% year-on-year increase in rental costs.
It, therefore, comes as no surprise that there’s a mounting bank of evidence to suggest affordability and rent arrears will increasingly figure in 2023. Many landlords ask LandlordBuyer ‘are rent arrears increasing?’, and we refer to a recent article in The Telegraph, which stated that 1 in 13 private tenants are now behind on their rent.
In addition, the UK Renters' Report 2023 - produced after Finbri questioned more than 1,000 renters - discovered that 19.38% of tenants have experienced unaffordable increases in rental payments, while 11.59% reported they were afraid of eviction if they couldn't pay the full amount.
These figures are weighing heavily on the mind of property professionals. Of the 160 letting agents who took part in Goodlord’s recent ‘2023 predictions’ webinar, the majority expected to see more landlords exit the market, against a backdrop of rising arrears and falling house prices.
If a landlord can sense issues with rent payments – or if arrears are already building – they could consider the following:-
Reduce the rent: a rent reduction may help tide a tenant over a bad patch, with the full rent being reinstated at a pre-agreed date.
Caution: any rent reduction agreement must be made in writing, with a date when the reduction comes into effect, when it will end and what the reduced rent will be.
Agree to a rent holiday: a landlord can suspend the rent totally to enable a tenant to regroup financially, which means zero rent will be due during a pre-agreed period.
Caution: a rent-free period should be confirmed in writing and it should be made clear if the landlord expects any missed payments to be paid back at a later date.
Set up an arrears repayment plan: accumulated arrears can be cleared via a payment plan, when a tenant pays their regular rent and an extra sum on top to start clearing the debt.
Caution: a written repayment plan is vital, setting out how much extra the tenant is expected to pay and for how long.
Recover money from benefits: some tenants struggling to pay their rent can use their benefits to help with the cost, with up to 20% being paid directly to the landlord.
Caution: not every tenant qualifies for a discretionary housing payment or help - landlords can check on this Government web page for guidance.
Contact the guarantor: if a guarantor was in place when the tenancy agreement was signed, they can be called upon to pay the rent if the tenant can’t.
Caution: it’s not a given that a guarantor will be able to cover the rent – they may have passed guarantor referencing at the start of the tenancy but they may be experiencing their own financial hardship now.
Start the eviction process: if rent areas of at least two months have amassed, a landlord can issue a Section 8 eviction notice using ground 8.
Caution: the eviction itself won’t help recover unpaid rent – a County Court Judgment, bailiff action, an attachment of earnings order, a third party payment order, a charging order or bankruptcy action may be necessary.
A viable, no-hassle alternative is to sell to LandlordBuyer. As a professional investor and buying company, our remit includes purchasing buy-to-lets, for cash, where tenants are already in arrears. There is no need to evict the tenant, create a repayment plan or try to sell the property on the open market.
You can start the sales process now by requesting an online valuation, or contact us to speak to a real person.
FAQs
Q. What invalidates a Section 8 notice?
A. If certain criteria aren’t met, an eviction may not proceed or it may be thrown out of court. For a Section 8 to be valid, the correct amount of notice must be given; the notice must give a date after which court action can start; the deposit must have been correctly protected by a Government-approved scheme and the tenant must have been provided with all the required prescribed information at the start of the tenancy. The eviction can also be halted if the tenant clears their arrears during the process.
Q. Can rent arrears be deducted from deposit?
A. If the tenancy agreement contains a deposit clause, which details that rent arrears are a valid reason for deductions, the landlord can deduct any rent arrears from the deposit before it is refunded to the tenant.
Q. What is the Breathing Space initiative?
A. Officially known as the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium), this legislation allows tenants in rent arrears to apply to have debt recovery action against them suspended for almost two months. More details can be found in our Breathing Space blog.