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Rise in Tenants having Problems Paying Rent

Its official – that increasing numbers of tenants appear to be struggling to make rental payments.

According to latest research from the Association of Residential Letting Agents (ARLA) in the fourth quarter 2010, 40 per cent of ARLA members reported an increase in tenants struggling to meet rental payments in the preceding six months – a rise from 35.9 per cent in Q3 2010.

This is the first time in 18 months, that the number has increased, perhaps indicating that job losses and pay cuts are beginning to take effect, and resulting in tenants having financial difficulties.

The situation was least noticeable in central London, where just under a third (27.9%) of ARLA members reported an increase, compared with the rest of the UK (46.4%).

Ian Potter, Operations Manager at ARLA, said: “At the beginning of last year we predicted that the number of tenants having difficulties paying rent would increase and unfortunately, this seems to be the case today.

It is a situation which can have serious repercussions throughout the PRS as, without guaranteed rent income, landlords may also have problems paying mortgages. At worst, it may result in a rise in repossessions.”

Mr Potter then goes on to say that “While it is difficult for landlords to predict whether current or prospective tenants will hit financial difficulties, our research highlights the importance for landlords or agents to implement a thorough selection process and to conduct reference checks on potential tenants – and to consider the benefits of rental protection insurance.”

My (Grumpy) view on rental protection is somewhat soured by my recent experience with a company that offered such protection, based on their own tenant referencing, but tried to find wriggle room out of paying up when said tenant then defaulted!

The ARLA spokesman fails to mention that rental protection is only available if the reference checks are done through specific agencies, and that protection is offered only for squeaky clean potential tenants. A high number of people nowadays don’t pass the stringent tests, and therefore don’t qualify for protection. So what use is the protection being offered if it can’t be taken up??

Mr Potter also goes on to say that “For anyone looking to rent a property – do your research before signing up with a new landlord. And if letting or renting a property through an agent, make sure the agent is a member of an organisation such as ARLA, which ensures landlord and tenant money is protected by a client money protection scheme.  Many agents do not have this consumer protection. ARLA agents are also required to be members of an ombudsman scheme which can offer redress if things to go wrong.”

Interestingly, ARLA’s research also showed a rise in the number of tenants haggling with landlords over rents, from 44.5% to 47.1%, which further indicates the financial pressures on tenants.

The ARLA Review & Index for Q4 2010 gives more details of their recent findings.

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    Posted in Lettings and Management, Rent Arrears, Tenant Behaviour.

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