Tenant arrears improve

Over the last 12 months tenant arrears have remained stable or fallen, according to 84% of landlords.

Research carried out by LSL Property Services, owner of the UK’s biggest lettings agent networks, this positive news comes despite the impact of the recession and six months of rent rises.

Of the 16% of landlords who did report increases in tenant arrears, 11% saw just a slight rise, attributed to renters in cheaper accommodation failing to meet lower rents.

The average rent of those in arrears was £472 a month in July – 30% lower than the average UK rent. The total amount of rent in arrears each month has dropped in the last year to £213m in July – the lowest amount sice LSL launched its Buy to Let Index over two and a half years ago.

David Brown, commercial director of LSL Property Services, said:

“The hike in tenant arrears hasn’t materialised in the last 12 months as many feared. With the labour market remaining relatively strong, most tenant finances have been in better shape than expected - keeping the overall arrears across the UK down.

“But a minority of landlords have experienced an increase, driven by lower income tenants renting out cheaper accommodation. Those who suffered first from the recession were those in lower paid jobs, often the most disposable workers when employers look to cut.

“ Even so, a changed tenant mix has improved the arrears picture for many landlords. Thousands of would-be first-timers are remaining in the private rental sector. These are generally more financially stable, and able to meet higher rents on time.”

The improvement in tenant arrears is also down to a change in the way landlords handle them. A quarter (24%) of landlords say they act much more quickly to deal with non-payment now than they did a year ago.

Brown said: “The changing practice of landlords has helped trim down the number of tenants slipping into severe arrears. In a world where house prices aren’t rocketing up, landlords are no longer focussing on capital gains for their profit – they are more conscious of the value of rental income.

“Now landlords are reacting more quickly to any situation that may hamper their cashflow – before tenants fall into severe arrears.”