JUNGLEdrum News

Novice landlords need to be made aware of risks

With current housing market conditions favouring the rental sector, let-property insurance specialist PropertyRisks believes that we may be seeing a new tranche of inexperienced landlords coming into the market. The company is urging agents to recognise that novice landlords may not be aware of all of the risks involved in renting out property and to ensure that they are given proper advice at the outset.

Nigel Atkinson PropertyRisksNigel Atkinson of PropertyRisks says, “Looking at all the signs, we could be about to see new landlords coming into the buy-to-let market again. In many areas demand for rented property is outstripping supply and rentals are rising, so people will start to assume that they are guaranteed a return on their investment. At the same time, house builders have stock properties that they need to move and if they see potential from buy-to-let, they will be putting forward some attractive deals.

“We saw in the previous buy-to-let boom that inexperienced landlords did not always understand the full risks associated with property rental, such as loss of income if a tenant defaults. Agents have a duty of care to make sure that any client is fully aware of the ability to ensure that their rental income is protected and that they have legal expenses cover should problems arise with tenants. What many new landlords may not realise is the impact that problems can have, particularly if they are relying on rentals for part or all of their income or to meet their mortgage obligations.”

While long-term buy-to-let investors with multiple-property portfolios may take the decision to carry their own risk, it is usually those with a single property bought for the immediate income it can generate that are the most vulnerable. PropertyRisks estimates that the legal costs of regaining a property when a tenant defaults can run to between &1000 and &2000. The company quotes an increasing timescale for evictions, currently an average of six months but rising, due to the current numbers of tenants in arrears and court delays in ordering possession. It points out that a potential 6 month loss of rental income on top of the legal costs may lead to the accidental or inexperienced landlord putting their investment property in jeopardy from their lender.

Nigel Atkinson says, “While things are looking good for the rental market, elsewhere in the economy we are still looking at the potential for more job losses, particularly when the public sector cuts kick in. Unemployment is one of the main reasons why tenants default on their rental payments and no matter how well referenced a tenant is, no one can guarantee that they will always be able to meet their financial obligations. Agents must make all landlords, especially new ones, aware of the risks and the availability of appropriate cover, particularly if the landlord is going to be reliant on rental income to service their buy-to-let borrowing.”


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