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Posted by Let Alliance on January 12, 2011
Tenants with money problems are having a tough time paying their buy to let rents and could cause letting agents and landlords cash flow issues.
A year of job losses, pay cuts and tax hikes as the economy realigns after the credit crisis is playing havoc with letting agent management fees and landlord mortgage repayments.
About 40% of letting agents are dealing with tenants who have financial difficulties that mean they can only afford to pay some rent rather than the full amount each month, according to a rental conditions survey from the Association of Letting Agents (ARLA) for the last three months of 2010.
The finding is the first indication of a rise in arrears problems for 18 months and a 10% increase on the number of letting agents reporting the issue in the third quarter of 2010.
Ian Potter, ARLA‚Äôs operations manager, said: ‚ÄúAt the beginning of 2010 we predicted that the number of tenants having difficulties paying rent would increase and unfortunately, this seems to be the case today.
‚ÄúIt is a situation which can have serious repercussions throughout the private rental sector as, without guaranteed rent income, landlords may also have problems paying mortgages. At worst, it may result in a rise in repossessions.‚Äù
ARLA suggests landlord and letting agents should try and counter cash flow problems with a tenant selection process that checks out credit histories and references to highlight tenants who might face financial problems in the future.
‚ÄúIt‚Äôs difficult for landlords to predict whether current or prospective tenants will hit financial difficulties, our research highlights the importance for landlords or agents to implement a thorough selection process and to conduct reference checks on potential tenants ‚Äì and to consider the benefits of rental protection insurance,‚Äù said Mr Potter.