Referencing tenants to make sure they can pay rents is being stressed for landlords as the number seeking vacant possession of buy to lets in the courts is at the highest level for three years – and up nearly 13% from last year.
The latest Ministry of Justice statistics show a 25% rise in landlord claims since 2010, with 126,351 possession claims in the first nine months of this year, compared with 101,415 in the same period in 2010.
Part of the reason is blamed on rising rents, with tenants spending up to a third of their disposable income on renting a home.
Landlord insurers are suggesting landlords should check tenants have enough money to pay their rents as part of their referencing process.
They also urge landlords to make claims against rent guarantee insurance quickly, as many policies have a 30 day cut-off and refuse late claims.
‘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,’ said Michael Portman, managing director of specialist insurer LetRisks.
Portman explained rent surveys show 1.2% increases over the past 12 months look to keep rising at moderate rates in 2014.
“Some tenants will continue to find it hard to find the rent each month, with the latest figures from the Office for National Statistics showing that a third of working men are in part time jobs, because they cannot find a full time job, compared to 13% of women,” he said.
“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.”
The firm suggests speaking to tenants about late rent and explaining the legal consequences of falling into arrears.
If the tenant fails to pay the rent, serve notices to gain possession as soon as possible as if the tenant subsequently pays, the notices can be withdrawn.