One of the most significant consequences of the Covid-19 pandemic for landlords has been a rise in rent arrears.
With many tenants put on furlough or made redundant, the impact on personal finances means many have struggled to pay rent.
When renters fall behind with payments, landlords’ finances are also affected. Earlier in the year, there was the option to request a buy-to-let mortgage payment holiday.
However, as we move into a New Year, this sort of support for landlords has largely dried up.
A survey of 6,000 adults carried out by YouGov and analysed by the Resolution Foundation suggests that one in eight private renters has fallen behind with housing costs since March.
Meanwhile research from rental payment processor PayProp shows that 14% of tenants were in arrears at the end of August, with the average renter who had fallen behind owing 127% of their rent.
Recent developments around a Covid-19 vaccine and the extension of the furlough scheme until March 2021 will help to stem the tide of rent arrears during the early months of 2021.
However, it will take a long time for finances to fully recover as the economy remains in recession and huge employers such as Arcadia and Debenhams continue to cut jobs.
So, if you’re facing rising arrears after the festive period, how can you protect your income and get everything back on track?
What should you do when a tenant stops paying rent?
The first thing you need to do when a tenant falls into arrears is to contact them to find out about their financial situation. Opening the lines of communication and building a relationship can build trust, increasing the chances of the tenant paying back what they owe.
It’s also beneficial to educate renters in arrears about the financial support available to them, including Universal Credit and the government’s various schemes related to the pandemic.
When it comes to clawing back the unpaid rent, affordable repayment plans are a great way of making a dent in the debt. Repayment plans help tenants to organise their finances and provide you with a better indication of cashflow.
Reducing rent arrears also requires a lot of chasing and administration. Reminding tenants to pay rent by text can be effective, as can persuading them to set up a standing order for their monthly payment.
It’s important that you keep a record of all payments and conversations. This helps you to keep track of the latest situation and provide key evidence further down the line if required.
What if the problem escalates?
In many cases, with the right approach you’ll be able to recoup the money you are owed and get tenants back on track.
However, sometimes arrears can spiral out of control. This could leave you in a tricky situation and facing thousands of pounds of lost income.
When this scenario occurs, it is likely you will need to pursue an eviction through the courts to regain possession of your property.
Court evictions are commonly time-consuming, complex and expensive. Due to the pandemic, these issues have become more acute.
Due to a Christmas truce on evictions and the government’s strict Covid-19 restrictions, no enforcement action will be taking place in English courts until January 25 2021.
Meanwhile, landlords who want to evict tenants now have to provide six months’ notice until March at the earliest. There are shorter notice periods, however, for the most serious cases of rent arrears, domestic abuse, fraud or anti-social behaviour.
What’s more, landlords now also have to provide additional information on how a tenant has been affected by the pandemic when seeking an eviction.
Even when the pandemic-related eviction measures are relaxed, it is highly likely Section 21 will be scrapped as part of the Renters’ Reform Bill at some point in 2021 or 2022.
A professional letting agent can save you time and money
As you can see, reducing rent arrears is a thankless and challenging task. There is a huge amount of communication, record-keeping, chasing and administration to be done if you want to protect your portfolio.
Working with a local, professional letting agent ensures that this work is taken care of on your behalf. An agency like Oakfield has the experience and know-how to deal with tenants in arrears in a professional and effective manner.
We can also provide you with access to insurance products that can cover expensive legal fees and protect your income. If you don’t have this kind of protection in place, your cash flow is at risk and you may have to spend even more on the evictions process.
If you do have to seek an eviction as a last resort, having the support of a reputable letting agency makes the process less stressful. We can advise you on the best course of action to take and provide you with all the records you need for evidence.
Hopefully, rent arrears won’t be as serious an issue for landlords in 2021. However, while the impact of the pandemic lingers, it’s important you have the measures in place to deal with all level of arrears.
For further information on how to manage rent arrears or any part of the lettings process, please get in touch with us today. You can request a free instant online valuation to see how much your East Sussex property could be generated in rent each month.