Templeton LPA are a specialist practice of chartered surveyors which is part of LSL Property Services Plc which is the UK's largest residential letting agent. They looked at the amount of tenant arrears over the past few years and how landlords are dealing with them.
The tenant arrears figures for tenants in 'severe' arrears have been increasing by 18% annually and has reached the highest level since the third quarter of 2008. Almost 11,400 more tenants are over two months in rent arrears when compared with the previous year.
Paul Jardin, director and receiver at Templeton LPA said "The soaring cost of renting has created a two-speed market. The overall tenant population has coped relatively well with rising rents and soaring living costs - with total arrears actually down year on year in November. But a majority of renters are falling deeper and deeper into payment difficulties and the number of severe arrears cases is rising. While the wider tenant mix has changed since the mortgage market downturn - with a greater number of financially sound yet frustrated first time buyers - a growing number of tenants are seeing their job prospects affected by the UK's economic malaise".
Landlords are looking into serving eviction notices on severe tenant arrears. In the final quarter of 2011, 24,966 tenants were facing eviction notices, which was an 11% increase from the previous years figure of 22,558.
Paul Jardin said "The growing level of severe tenant arrears has yet to filter through into mortgage payment problems for landlords. Mortgage rates have kept monthly payments low, but there has also been a change in landlords' behaviour. With capital gains falling by the wayside in the past six months, rental income has become the most important component in an investor's annual return - but it also pays a landlord's mortgage cheque.
"As a result, many landlords are being less lenient with tenants facing initial payment problems, and are looking to use court orders to replace tenants quickly in expectation of finding a substitute - and potentially an increased rent, given the strength of competition for rental property in many areas of the UK. However a growing number of landlords are also exploiting higher rents to set aside shush funds for future arrears and void periods or signing up to rental indemnity schemes."