Almost a million tenants have built up rent arrears since March 2020, according to research by National Residential Landlords Association (NRLA). The alarming statistic is part of an investigation NRLA has been conducting into the state of the rental market in the wake of the COVID-19 pandemic, and it makes for disturbing reading.
Some 7% of those surveyed had built up rental arrears, and while median rental arrears were between £251 and £500, 18% (or the equivalent of 150,000 tenants) of those with arrears had built up rental debts of over £1,000. With the Government’s furlough scheme coming to an end in late September, numbers of defaulting tenants are likely to increase, meaning letting agents will need to develop new strategies on how to handle those who fall into arrears.
As part of its pandemic response, the Government put protective measures in place to make it harder for landlords to evict tenants. Although these legislative devices are being wound back, evictions can be long and costly, so it’s often in a landlord’s interest to find alternative ways to deal with defaults.
How agents can help
Agents should be in a position to propose repayment plans to accommodate both tenant and landlord. If they aren’t comfortable offering this service in-house, there are a number of effective online tools available to help. They can also point tenants to resources such as funding support via universal credit, housing credit, or a discretionary housing benefit. Homeless charity Shelter has some useful advice on budgeting and reducing bills, which could be passed on to anyone struggling.
Mediation services are becoming a popular way to settle disputes and avoid legal action, with the government authorised Property Redress Scheme (PRS) launching its own scheme in 2020. Agents should consider either offering or recommending services to help tenants and landlords find solutions that do not involve going to court.
It’s important to remember that the Government’s new Breathing Space law prevents vulnerable tenants from being chased for rental arrears for up to 60 days (or the duration of treatment, plus 30 days if the breathing space is for a mental health crisis). If you’re told by a tenant in arrears that a debt owed to you is in a breathing space, you must halt all action to recover it until the breathing space has come to an end.
How the future is looking
While it might seem like a tricky time for landlords and agents, there is positive news on the horizon. The labour market is starting to recover, with numbers of payroll employees increasing month-on-month and job vacancies on the rise. Some areas, such as the North-East, North-West, East Midlands and Northern Ireland, are now above their pre-pandemic February 2020 levels. The redundancy rate has also reached pre-pandemic levels, which suggests that landlords may have seen the worst of rental arrears related to the pandemic and that there are calmer waters ahead.
For more information on why mediation is a useful tool for settling disputes, how it works, and how agents can get involved, watch Everything You Need to Know About Mediation, our on-demand webinar featuring Sean Hooker of PRS and Mike Morgan of Hamilton Fraser.
*Simon Bushell is Sales Director at Fixflo, the market-leading repairs and maintenance management software provider