The latest news from the Association of Residential Letting Agents (ARLA) shows the strain that tenants and landlords are coming under as the public sector cuts begin.
According to their research covering 554 offices the last quarter of 2010 40% of their members reported an increase in tenants experiencing problems in meeting their rental commitments. This is an increase of 4.1% since the previous three months. The problem was much less pronounced in London where the figure was 27.9% compared to the rest of the country at 46.4%.
The impact for them is that they may lose their rented home, the repercussions for the landlord is that they may have their property repossessed if they rely on the rental income to pay the mortgage – why have a Buy-To-Let (BTL) mortgage otherwise? This may well cause forced sales and trigger more falls in the housing market.
The Operations Manger of 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". He went on to say that this could cause serious problems throughout the private rented sector, especially as it is difficult to predict which tenants would fall into financial difficulty.
With the market as it is, it is very important that both tenant and landlord do their homework and get adequate insurance. The landlord should cover their rental income and the tenant should cover their own income. The tenant should also ensure that their deposit money is properly placed in a client money protection scheme.
The danger for tenants is that a 'serial' landlord could go bust and have all their properties repossessed whether or not rent has been paid. But the tenant has to comply with credit checks but no-one it seems really checks on the landlord's ability to comply with the assured short-hold tenancy.
For landlords it is important that they either know exactly what they are doing or hand over their properties for an expert to look after. These are difficult times and having an expert dealing legally and properly with tenants when such delicate areas as rental arrears and evictions are in danger of becoming more prevalent can surely only be a good thing for peace of mind.