Chris Norris, policy manager at the National Landlords Association
As the economy suffers, households struggle to meet their financial commitments. This certainly isn’t a new phenomenon and won’t surprise too many people. Likewise, one of those commitments which sometimes gets overlooked is rent.
Like many small businesses, property portfolios usually operate according to tight margins with very little leeway should income fail to materialise. Failure on the part of a tenant to pay their rent means no income against a very significant asset.
This is not good for any balance sheet and particularly bad for landlords as they are legally obliged to continue to provide a service to their tenant until a court orders them to leave – prolonging potential losses.
Of course, this isn’t the end of the world as we know it. Landlords combine investment with day-to-day business and are accustomed to adapting to the risks associated with letting property. While it is impossible to remove the element of risk entirely, there are a number of precautions portfolio managers can take to mitigate the risk of significant arrears.
Thorough tenant referencing is an essential tool for identifying risk. Prior to agreeing a tenancy, landlords should follow up employer and previous landlord references to ensure that they are genuine. Proof of income and a credit check are also useful tools to identify individuals with a history of payment problems.
Rent guarantee insurance is also an option, in case, despite your best efforts, the worst should happen.
However, once the tenancy has begun, the best advice the NLA can offer any landlord is to keep the lines of communication open with your tenants.
Regular contact can make it more difficult for tenants to dismiss their landlord as a faceless creditor who can be ignored, while making it easier to identify potential issues early and prevent them from becoming very expensive problems later in the day.
Also answering in this week’s Market Watch are:
Alan Cleary, managing director of Precise Mortgages
Stephen Nation, divisional managing director for Sequence Lettings
