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BTL mortgage arrears feared by UK landlords as tenant rent arrears increase

PRS Rent Arrears Set To Rise Again in 2012

Rent Arrears are set to rise in the UK Private Rented Sector, (PRS), during 2012 as more landlords face dealing with tenants who cannot afford the rental payments on their residential property.

The UK media reported at the end of last year that the number of court orders to evict tenants had risen by 11% during 2011.

In fact, in the last quarter of 2011:
• 78,970 tenants had rent arrears, with 11,400 more tenants over 8 weeks in arrears than in the same period of 2010, a rise of 18%.
• 24,966 tenants were in the process of dealing with eviction notices, an increase of 11% (22,558 in 2010).

A growing number of tenants face deepening financial difficulties, with many tenants jobs and prospects affected by the UK’s economic malaise and with the implementation of the Government’s Welfare Reforms, the number of tenants facing severe arrears and eviction is set to rise further.

The growing level of tenant’s rent arrears has yet to filter through into Buy-To-Let mortgage payment problems for landlords, but this could change in 2012.

In the last quarter of 2011, the number of Buy-To-Let mortgages more than 3 months in arrears fell by 7% compared to the previous quarter, representing an annual decline of 17%.

However, at 26,300, there are still more than five times as many Buy-To-Let mortgages in severe arrears compared with the same quarter of 2006.

Record low, 0.5% Bank of England (BoE) interest rates have kept monthly payments low for those with BTL mortgages tracking the base rate, but there has also been a change in the behaviour of UK landlords. With a healthy rental income becoming the most important component of a property investor’s annual return. Rental income that is sufficient to not only cover the landlord’s mortgage but also provide the landlord with some cashflow.

Landlords are becoming less tolerant of tenants payment problems, and many are seeking eviction as soon as the tenant’s rent arrears reach 8 weeks, using court orders to replace tenants quickly in expectation of finding a financially sound substitute.
UK landlords anticipate that in 2012 due to a growing number of factors, both overall rent arrears and severe rent arrears will rise, leading to increased tenant evictions, hampering the landlords ability to meet their monthly mortgage costs.

This situation that could lead to many disgruntled landlords leaving the Private Rented Sector and a huge increase in Buy-To-Let repossessions.

Legal 4 Landlords offer UK landlords a number of solutions to help them manage their rental property business better.

As well as being the fastest growing UK eviction specialists, Legal 4 Landlords offer a wide range of landlord services including specialist insurance for landlords and Rent Guarantee Insurance.

Time for the tenant to leave

Parts of UK are Eviction Hot Spots

New research from Shelter highlights the areas of England where people are most at risk of losing their homes.

The charity claims that one in every 111 households is at risk of eviction by either a landlord or mortgage lender, with those living in London most at risk, followed by the residents of Manchester, Slough and Peterborough.

Shelter’s study also reveals clusters of high risk in the North West and the Midlands: Nottingham, Newcastle and Knowsley all have eviction risk rates more than one and a half times the national average.

While urban areas are more likely to have higher rates of eviction risk, rural areas such as West Lancashire and Bedford are also affected, with levels higher than the national average.

Shelter’s chief executive, Campbell Robb, comments: “Shelter research shows that a third of people are already struggling with their housing costs or falling behind on payments. In these unforgiving conditions, it only takes one thing – illness, job loss or relationship breakdown – to lead to things spiralling out of control and into homelessness.”

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UK Bailiffs Christmas Holidays

UK Bailiff Seasonal Amnesty

A seasonal reminder to landlords and letting agents that Bailiff Amnesty’s will begin around 12th December 2011 to the 9th January 2011. Please check your local County Court for more details.

 The amnesty, which is not widely publicised, is implemented due to local authority offices, solicitors, courts and housing welfare organisations festive holiday closures.

Unfortunately for landlords, the festive season of good cheer can be one of the costliest periods due to an increase in rent arrears, especially from LHA tenants.

 Up to the end of 2010, there were 995,000 LHA tenancies and rent arrears in this sector were thought to be in excess of £290 Million (GBP).

This year research indicates that there are now over 1Million LHA tenancies and with more changes to the Government’s Welfare Reform Bill due to be implemented on 1st January 2012, rent arrears are expected to increase further.

 Landlords are urged to act fast when dealing with defaulting tenants, especially at Christmas as courts experience backlogs of paperwork and hearings in the New Year.

Speak to your local office now or call our free phone help line – 0800 840 7133

 Legal 4 Landlords Eviction and Rent Recovery Services

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The clock is ticking

Time is Running Out For LHA Landlords

1st January 2012 will see further changes to Local Housing Allowance (LHA) under the Government’s welfare reform.

 The age limit for shared accommodation room rate is set to rise from 25 to 35.

 This means that anyone under 35 and living by themselves or renting a room will be restricted to the shared room accommodation rate.

 This new figure is obviously well below the current market rent for 1 bedroom properties in most areas, as this will now be calculated on the 30th percentile of the rental cost for 1 bedroom properties in each area.

 This could mean disaster for landlords in the Private Rented Sector (PRS) as tenants in receipt of benefits will soon fall into arrears as their housing portion of their benefit payments (Universal Credit) are reduced by the Government.

 With increasing unemployment due to the state of the UK & World economies, more and more people are finding themselves having to make a claim for state benefits including LHA.

 2012 may well see an increase in evictions, homelessness and maybe even a drop in the average property rental price, as landlords could be forced to lower their rents to accommodate tenants who are only entitled to the lower threshold of housing allowance.

 This scenario has been cited by landlords who keen to avoid benefit tenants and now are only seeking tenants in employment. The private rented sector could end up the exclusive territory of the employed in a few years time and landlords are urged to make thorough reference checks when accepting new tenants.

Landlords who wish to learn more about successful LHA renting and how to deal with local authorities to ensure direct payment, should consider buying “The Essential LHA Manual For Landlords” by The LHA Expert – John Paul.

The ebook costs £47 and is packed full of the exact processes and systems The LHA Expert uses to get paid directly by Local Authorities on 97.9% of the 500+ properties he has let out to LHA Tenants, the contents include:

  • Why you should bother with LHA, and how embracing the opportunity can take you from “Arrears Hell to Cash-flow Heaven”
  • Which properties to target for maximum profit
  • How to make sure you get the full amount of rent available
  • Who to steer clear of to avoid problems
  • Some little known “secrets” to using the LHA rules to your advantage
  • How to switch Tenants on the old system onto LHA to increase your income
  • Exactly how to make a claim – so that you actually get paid!
  • How to virtually GUARANTEE you get paid directly by the Local Authority –(this one alone is worth buying the book for!!!)
  • How you can get paid direct after 4 weeks NOT 8 weeks
  • The latest on Overpayments, and how you can make sure they are taken from the Tenant and NOT you

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