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Rent arrears surge leads to sharp rise in possession orders
Let Insurance Services reports that private landlords appear to prefer obtaining possession without a money order, as they are faced with cash-strapped tenants who have no way of paying back monies owed. The number of possession cases without a money order has increased by 33 per cent on 2010, whereas the number of cases using standard procedure to obtain possession has remained fairly static at only a 3 per cent increase.
In nearly 40 per cent of the courts in England and Wales, the number of claims brought by landlords and agents which resulted in an order being made for possession has increased by between 10 per cent and 50 per cent on the previous year. Increases are being seen across the country; Aylesbury (10 per cent), Bury St Edmunds (30 per cent) and Chelmsford (45 per cent).
Across the UK, the number of court cases continues to increase by 6 per cent and the trend represents both increased risk and continuing uncertainty for landlords and agents. Let Insurance Services has seen a 24 per cent increase in rent guarantee insurance taken out by landlords in the first nine months of this year, and a significantly higher increase in arrears notifications over the same period.
Michael Portman, Managing Director of Let Insurance Services commented: “Landlords and agents are facing mounting rent arrears and with no alternative, but to seek a quick resolution in the courts. Tenants have become more savvy with rental law and much more conversant with the legal detail. This trend, combined with the fact that many tenants have fallen on bad times and have no financial resources to clear arrears debt has led many agents and landlords to pursue possession only, foregoing any attempts to secure rent arrears through the courts. Landlords and agents often face better odds securing new tenant rental income than they do securing rent arrears from an existing tenant.
“We have seen a sharp rise in demand for rent guarantee insurance as landlords and agents look to find ways to protect their rental income. It is clear that this problem is not going to go away. The labour market is starting to feel the strain of public sector job losses and the economy is far from healthy. Ever increasing fuel and food prices could place more tenants in difficulty and the labour market has much ground to make up as the private sector struggles to compensate for public service job losses.
“Against this backdrop, as rents rise over the medium-term, a growing number of tenants will see their finances come under mounting pressure – and we expect tenant arrears cases to climb over the next 12 months.
“The message to landlords and agents is make sure that they consider the strength of the tenant when letting the property by taking out full references and to consider specific insurance through a specialist company for loss of rent if the tenant defaults and the cost of legal expenses to obtain possession.”
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