The cost of living crisis is making the recovery of rent arrears more challenging for private landlords, and exacerbating the negative impact Covid-19 has had on the sector.

Although rent is a priority debt, the significant increase in household bills is forcing some tenants into poverty.

It’s also a difficult situation for landlords to deal with, especially when lack of money is the sole cause of the arrears. Their tenants may have paid without issue previously, and could be experiencing financial troubles that are caused purely by external circumstances.

Out of control?

So, are any other problems contributing to this issue for landlords? Are they dealing with the challenge, or is it spiralling out of control?

Rent arrears are a significant issue for private landlords”.

Rent arrears are a significant issue for private landlords, but unfortunately, not the only one they’re currently facing. Other problems include increased mortgage interest rates and upcoming legislative changes.

The consistent rise in interest rates has increased landlord mortgage payments considerably in recent years for those who don’t have fixed rates of interest.

These issues add to the problems for landlords already burdened by late or non-payment of rent, so are they dealing with rent arrears effectively?

First step

Landlords typically make contact with their tenants as a first step when a rent payment is missed.

The landlord may be able to negotiate a plan with their tenant to repay the arrears at an affordable rate over an extended period, for example, which is usually paid as a top-up amount on the ongoing rent payments.

Furthermore, if a tenant is eligible for the housing element of Universal Credit it can be sent directly to their landlord where appropriate, and relieves some of the financial pressures for both parties.

When a rental lease is taken out, the new tenant may have provided the landlord with a guarantor whom the landlord can approach for payment in the event that the tenant cannot pay.

Landlord insurance policies also typically cover rent arrears and can be used to recoup the outstanding monies if necessary. In addition, a landlord should be able to claim through the rental deposit scheme if the tenancy ends with money still owed.

Eviction

Landlords have the right to serve a notice of eviction on their tenant for breaching the terms of the tenancy due to non-payment of rent. As a last resort, it allows the landlord to seek a new tenant and limit the time that no rental income is being received for the property.

When rent arrears occur, it’s a stressful time for both landlords and tenants. The cost of living crisis makes it even more challenging for tenants to pay their rent according to the terms of their lease, and for landlords to receive the return on investment they originally anticipated.

Karl Hodson is a member of the UK Business Finance team, which is part of the Begbies Traynor Group. He is responsible for helping businesses across the UK raise funding for a variety of purposes such as working capital, expansion and capital equipment. He has specialist knowledge of raising finance through invoice and asset-based lending, crowdfunding, loan and equity funds and government schemes.