As we start 2023 in an official recession, with energy bills set to rise even further and the cost of living crisis continuing to squeeze finances, more tenants than ever will struggle with their monthly budget.
Worryingly, coming off the back of an era of cheap borrowing and easy credit, a large proportion of renters will have accumulated debts and taken on extra financial commitments. From credit cards and car loans to more modern methods of finance, such as Klarna and other ‘buy now, pay later’ credit schemes, finding enough money to pay every bill may become a struggle.
There are red flags in abundance. A recent report by Shelter revealed 2.8 million tenants are already struggling to pay their rent, while a survey by Market Financial Solutions found 49% of tenants are worrying that they wouldn’t be able to pay their rent as we move through 2023.
The bills tenants will prioritise this year is in the spotlight. A landlord may naturally think paying the rent will remain the most important payment for tenants but this will not always be the case. For many, keeping up with gas and electricity bills will come first, especially as the thought of missing rent payments is softened by initiatives such as the Debt Respite Scheme (Breathing Space). In addition, missing a loan or credit card repayment can get tenants in more long-term trouble than missing a month or two of rent.
This is all down to credit scores. Renters are more likely to get a CCJ (a county court judgement) for unpaid credit card bills or missing loan repayments than rent arrears. It’s information that is freely available on the internet and it just may sway renters who are in financial difficulty, influencing what bills get paid.
Some tenants are even willing to risk a CCJ for unpaid rent as there is less financial comeback. Why? A CCJ for rent arrears will not be recorded with The Registry Trust Ltd if obtained through possession proceedings. As a result, the CCJ will not be visible to credit reference agencies, therefore some tenants are comfortable with a CCJ of this nature.
On the flipside, a CCJ for an unpaid car loan or even a gas bill in debt can end in a CCJ that is lodged with The Registry Trust Ltd, consequently adversely affecting the person’s credit score and ability to secure finance in the future.
Rising rent arrears are worrying and with landlords’ profits forecast to drop to just £7 annually, exiting the buy-to-let market may be the most sensible option. You can sell to Landlord Buyer even if your tenant is already in arrears – and you won’t need to serve them an eviction notice. As well as buying single properties for cash, we also purchase property portfolios. Please get in touch for selling details.