UK landlords seeking possession of properties through the courts on the rise

The number of landlords and agents in the UK seeking vacant possession through the courts is at its highest level since 2009 and up 12.7% from last year, the latest data shows.

It indicates the need for strong tenant selection processes and should remind landlords to consider rent and legal protection insurance, according to the firm LetRisks which provides training for agents and policies for the lettings industry.

The government’s latest Court statistics show that there has been almost a 25% rise in landlord claims since 2010, with 126,351 possession claims made in the first three quarters of this year, compared with 101,415 in the first three quarters of 2010.

In a recent survey for BBC Panorama, 31% of people paying a mortgage or rent spend more than a third of their disposable income each month doing so. The rent that tenants pay should be no more than 40% of gross earnings under the recognised thresholds that tenant referencing companies use, including LetRisks. 

The firm says that landlords and letting agents should be aware of these limits when screening potential tenants, since it is easier to avoid arrears, than it is to recover them.

Non-payment, late or partial payment of rent remains the biggest worry for landlords. Good letting agents are tending to highlight the risks to landlords more and are putting strict vetting procedures in place, backing this up with rent and legal protection insurance to help protect themselves and the landlord against the non-payment of rent.

‘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 LetRisks.

He pointed out that across the country rents have typically increased by 1.2% over the last year and they look like they will continue to rise 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 employment, 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,’ he added.

Advice from the firm is that if a tenant pays the rent late or not at all, the agent or landlord should try to enter into and maintain a dialogue with them to gain an understanding of their situation and explain that legal action will follow, if the arrears are not met.

To protect your landlord’s interest you will need to serve tenants with the necessary notices to gain possession as soon as possible, whilst still maintaining dialogue. If the tenant subsequently pays, the notices can be withdrawn.
The balancing act between the landlord and tenant can be a stressful time for letting agents. If handled correctly and professionally it can sometimes resolve a potential nightmare for all parties concerned without the need for expensive court action. It is the moment when a good agent should be most valued by both parties.

It also advises landlords that if they have insurance in place, they should be aware of the policy conditions for notifying claims. Many insurance policies have a very short window for notifying claims of 30 days. This can sometimes work against the agent who is working with the tenant to get the rent payments back on track.

Policies through LetRisks have a claims window of 45 days which allows agents more flexibility to make a judgment if they wish to give the tenant a chance to get the tenancy back on track.

The firm also points out that if a landlord does not have rent and legal expenses insurance, obtaining a court order for possession under section 8 and obtaining a money judgement will be expensive and take a minimum of at least three or four months. An alternative would be to try for accelerated possession instead and accept that you pursue a money judgement once possession has been obtained.