A call has gone out for agents to offer extra support to landlords in the coming months as arrears may well creep up thanks to the Coronavirus crisis.
A new report by rental payment automation platform PayProp, using data from letting agencies across the UK, shows that four out of five have seen the share of tenants in arrears grow since March.
The PayProp report reveals that following a big jump in April, the percentage of tenants in arrears has climbed to over 15 per cent now.
The average amount owed by tenants in arrears has also grown in relation to their monthly rent, although around a third of agencies actually saw arrears reduce as tenants began repaying the amount owed by them.
“After an initial surge in March when Covid-19 started to spread rapidly across the UK, heightened levels of rent arrears could persist for many months to come, despite many tenants settling some of their debt” says Neil Cobbold, chief sales officer at PayProp.
“Measures like the furlough scheme and Universal Credit increases have helped tenants to continue paying their rent, but payments are still less predictable than usual, and the furlough scheme is almost at an end” he adds.
“It’s therefore hugely important that letting agencies are on hand to help their landlords deal with rent arrears and associated issues.”
Cobbold suggests that digital record-keeping provided by letting agencies can help landlords to stay on top of rent arrears, allowing them to see how much is owed and by which tenants.
Agencies can also help landlords to create payment plans for tenants to pay back arrears over a manageable period of time – as recommended in government guidelines issued early in the pandemic period.
Recording those plans clearly is crucial as landlords will need to see whether or not tenants are repaying on schedule once normal life resumes, Cobbold suggests.
“Many landlords have been very flexible in agreeing temporary payment schedules with tenants in recent months. If all the information is recorded digitally by letting agents, this can help all parties to have a clearer understanding of their financial positions – and increase landlords’ chances of recouping unpaid rent.
“Keeping a record of all conversations and agreements made with tenants will also reduce the chances of payment disputes occurring later on.”
With evictions banned until the end of August – and possibly beyond if the government issues a further extension – there may well be a court backlog to clear past possession orders, plus an additional ‘queue’ for newer orders.
“It’s important that tenants who are having financial problems are advised to seek support so they can pay as much rent as possible” Cobbold says. “Letting agents should be familiar with the types of support on offer, such as Universal Credit and the Self-Employment Income Support Scheme, so that they can communicate them to landlords.”
“Agencies should continue to advise landlords to pursue the lengthy and expensive court process only after trying to agree repayment schedules with tenants struggling to pay rent” he adds.
“While eviction will always be the last resort, letting agents’ records of payments and agreements will also provide landlords with the evidence they need should they need to seek repossession.”
This post has originally been featured in Letting Agent Today.