Landlords are often placed in a difficult position as far as collecting payments is concerned – if you are a buy-to-let investor, you’ll have a mortgage of your own to meet, but may still be obliged to try and help your tenants when they find it difficult to cover their rental costs.
Recent changes have made it even harder for some landlords to rent out their properties, with cutbacks to benefits and certain other rules for low-income households that have many landlords uncertain of whether they can continue to take in tenants on housing benefits.
Here’s our summary of the current issues facing landlords – and how they make a focus on receiving rental payments on time more important than ever.
Tenants on Benefits
Current cutbacks mean that a tenant claiming housing benefits has to be aged 35 or above before they qualify for more than just a single room in a shared house, while local housing allowance cuts have taken the maximum benefit payment down from 50% of the local average rent, to 30%.
This leaves landlords in a very difficult situation, as 53% do not believe LHA recipients will be able to afford to rent a property under the new rules, and 69% expect to have no LHA tenants by 2015, according to figures from the National Landlords Association.
If that still seems far away, it’s worth taking into account the fact that a separate NLA survey recently found 46% of tenants have been in their current rental home for four years or longer, and 24% have stayed put for between two and four years.
Private registered landlords of social housing have been told of a pre-action protocol by the Ministry of Justice, which aims to determine the process of issuing possession claims based on rental arrears by social tenants.
The protocol “recognises that it is in the interests of both landlords and tenants to ensure that rent is paid promptly”, but adds that the landlord should also bear responsibility to act proactively, in order to ensure the tenant settles their arrears without the need for court action.
An attempt at alternative dispute resolution should be attempted, and an agreement to pay the full amount of rent going forwards, plus a reasonable amount of the arrears, should be drawn up – once this is in place, landlords are told they should postpone any court action.
Planning for the Future
Even if your tenants are not on benefits, and you’re not a ‘social’ landlord in the technical sense, keeping a close eye on your rental income is a must if you’re to stay on top of buy-to-let payments, or simply protect your ongoing revenues.
NLA figures show that 81% of landlords expect their property portfolio to provide a retirement income, while their confidence in the financial market was at an all-time low in February 2012.
For those individuals, a tight grip on maintaining rental incomes is particularly important, due to the doubt surrounding other sources of capital during the current economic cycle.