Landlords need to protect themselves against rent arrears and tenancy issues
Basic checks don’t always provide residential landlords with enough background information on the tenant to protect themselves against rent arrears or other tenancy issues, it is claimed.
These usually provide landlords with basic information to verify that the tenant is who they say they are and to highlight any background information about the tenant’s history.
However figures released by Total Landlord Insurance show this is not always the case. For example, 6.4% of tenants that Total Landlord Insurance referenced in September were found to have one or more County Court Judgement recorded at an undisclosed address.
Also checks from the first half of 2012, found that 23% of self employed applicants were unable to provide tax returns or acceptable proof of income and 51 applicants had provided false employment details.
‘More comprehensive checks will not only reveal this information but also obtain previous landlord and letting agent references where available’ said Eddie Hooker, chief executive officer of Total Landlord Insurance.
According to Credit Check, the Citizens Advice Bureau in England and Wales dealt with 8,500 new debt problems every working day during the year ending June 2012.
Total Landlord Insurance believes landlords should undertake more scrupulous checking of their tenants to protect their investment and income streams.
‘In much the same way mortgage lenders have become more stringent with their lending to ensure borrowers are able to meet repayments, landlords should act in a similar fashion to ensure that the tenant can meet their obligations,’ said Hooker.
‘High unemployment and stagnant wages are making conditions particularly tough on those having to rent with rent in many areas at peak levels, but it makes no business sense for a landlord to rely on an income from someone who is not financially stable,’ he explained.
He also pointed out that there is no guarantee that thoroughly screening a potential tenant will avoid taking on a future problem but it should be the starting point for all landlords.
Vacant properties, tenant arrears and unexpected maintenance charges are just a few of the many things that are costing small UK landlords £2.1 billion a year, with the average landlord paying out over £1,500 a year in ad hoc costs, research shows.
Meanwhile, leading providers of Guaranteed Rent, Northwood, reveals that 84% of landlords receive less money than they thought from their monthly rental income due to unexpected costs, such as tenant arrears and having to take time away from their core employment to deal with tenants and the property.
A property being vacant is something that particularly impacts landlords financially, with almost half revealing that they did not receive any rental income on their property for up to three months due to vacant periods, and one in 10 suffering for six months or more without tenants in their property.
The study, the first and largest of its kind in the private sector, also highlighted that over half of tenants are late with their rental payments and 59% of landlords have to chase tenants for payment at some point in the last year. This is something that creates real apprehension for UK landlords, with 91% admitting they are concerned about tenant arrears over the next two years.
‘The amount of money being paid out for unexpected costs each year is staggering, and with tenant arrears and vacant properties a very real concern, landlords can be hit hard,’ said Northwood managing director Nick Cooper.
‘Some people become landlords due to changes in personal circumstances, the need to relocate or because of the current housing market. The research shows that being a landlord can be like having a second job that is why we have a Guaranteed Rent Service to ensure our landlords get paid, no matter what,’ he added.