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Landlords enjoy seasonal cheer as number of tenants in severe arrears drops

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Landlords enjoy seasonal cheer as number of tenants in severe arrears drops

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Published by Max Salsbury for 24dash.com in Housing and also in Communities, Finance

Landlords enjoy seasonal cheer as number of tenants in severe arrears drops Landlords enjoy seasonal cheer as number of tenants in severe arrears drops

The number of tenants in severe arrears fell by 15.6% in the final quarter of 2012, according to the latest Tenant Arrears Tracker by Templeton LPA.

It was the first time the figure had fallen in over a year on a quarterly basis, with the previous four quarters seeing a rise of 10.8% each on average.

Q4 saw the amount of tenants in severe arrears fall by 16,000 to 86,000 - the lowest level since the final quarter of 2011.

The drop slowed 2012's growth in the number of tenants in severe arrears to 0.3%. Such tenants now represent 2.2% of tenancies in England and Wales, down from 2.5% in the previous quarter.

Tenants classed as in severe arrears are those that have been in arrears for more than two months. Templeton LPA, which is part of LSL Property Services, also found a wider improvement in tenant finance.

According to LSL's Buy-to-Let Index, overall tenant arrears fell in November, with 7.4% of all rent late or unpaid, compared with 8.1% during the previous month.

However, 2012 saw an increase in the amount of tenants facing eviction notices. Q3's 5.5% rise meant that 2012 experienced a 0.25% increase in the tenant eviction notice figure over 2011.

Paul Jardine, director and receiver at Templeton LPA, said: "Tenants’ finances have suffered a gruelling combination of rising living costs and rental inflation throughout much of 2012. With many budgets balanced on a knife edge, a slight reprieve from rapid rent rises towards the end of the year has been very significant. But the recent strength of the labour market has played the biggest role in halting the upwards climb in the number of tenants in severe financial difficulty.

"Unemployment has fallen dramatically to 7.8%, and with 44,000 more full-time jobs in the three months to November, fewer households have faced seeing their monthly income halted and their ability to meet the monthly rent cheque hampered. If the UK’s economy can avoid falling into a triple dip recession in 2013, a further improvement in employment levels will go some way towards preventing arrears cases from rocketing up."

David Brown, commercial director of LSL Property Services, said: "More investment in the private rented sector is needed. Thankfully strong tenant demand and yields are tempting more people to invest in the sector and existing landlords to expand their portfolios. But investors should place financial suitability of any prospective tenant high up their agenda when letting a property. Cutting corners at the point of vetting a tenant is a false economy, and can prove costly. It is far easier to take action to prevent arrears in the first place, than to resolve them after they have occurred."

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