The rental market has faced its greatest test during lockdown as many tenants have lost their jobs or struggled to pay rent, and if the economy now tanks as we come out of it, then landlords will face an even harsher challenge.
One area of the market that has proved most vulnerable to the pandemic are the host of small companies which offer guaranteed rent schemes.
In the good times they sound like a great idea – landlords know how much they will be paid every month in return for a lower rental income; many guaranteed rent firms operate on a 25% margin.
But as the redundancies and furloughs have gathered pace many of the dodgier or weaker operators have given up the ghost, disappeared or just handed back the keys to landlords, unable to absorb the sudden and steep revenue loss.
The biggest guaranteed rent operator of them all, national estate agency chain Northwood, says it has been able to tough out the downturn and stick to its promises.
This is despite revenue drops of up to 40% at one of its branches recently but overall, its efforts to work with tenants have kept arrears to 3% overall.
£70m a year
“Our guaranteed rent scheme liability is about £70m a year so when on 16th March, when Boris announced the lockdown, we were looking into the abyss across our 85 offices,” says Northwood boss Phil Gee.
“We have 10,500 properties within our guaranteed rent scheme but our ability to hand-hold tenants, our strategy of avoiding HMOs tenancies, being flexible on how much and when tenants pay their rent or repay arrears, plus the furlough scheme, saved the day.
“We’ve honoured our guaranteed rent commitment during lockdown and beyond and haven’t broken a promises to landlords.”