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Beware - new Coronavirus tiers could mean arrears rising in 2021

Covid-19 restrictions in force across the country for the foreseeable future means landlords must remain cautious in 2021 - and they should be prepared to see arrears rising.

PropTech automated payment platform PayProp says it has data suggesting that there was good news on arrears in November - the percentage of tenants owing rent dropped from 12.2 per cent the previous month to a slightly more encouraging 11.8 per cent.

The number of tenants in arrears spiked during September, to 15.1 per cent, although this remains below the 2020 peak of 15.5 per cent recorded in May. 

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A rise in September could be due to increased redundancies as official figures showed that 11.3 people per 1,000 employees were made redundant as the pandemic continued to hit businesses.

However, PayProp chief sales officer Neil Cobbold suggests that downwards movement is not a long-term trend, and predicts rising arrears in early 2021.

"Our research shows that on the whole, tenants who end up in arrears try to clear them. Even if they cannot afford to pay back the full amount, renters are generally open to reducing what they owe through affordable repayment plans" Cobbold explains.

"A particularly high level of tenants reducing their arrears during September could have been linked to a resumption of evictions in England and Wales, with renters agreeing to pay back what they owe in order to avoid their landlord seeking repossession.”

PayProp’s research shows that the percentage of rent owed by tenants in arrears fell to 121.1 per cent in November, down from 124.4 per cent in October and 125.5 per cent in September.

The level of rent owed by tenants in arrears in November was equivalent to the level recorded in May but didn’t quite reach the peak of 127 per cent recorded in August.

Meanwhile just over three quarters of tenants paid off some or all of their arrears between September and October, while a further 50 per cent paid back arrears between October and November.

But PayProp cautions that with more people pending more over the Christmas period, and jobs under risk from the Tier 4 restrictions introduced early this month, more jobs could be at risk.

"Although the situation improved towards the end of 2020, current market conditions mean that letting agents and landlords should be cautious at the start of 2021 as things could get slightly worse before they get better" says Cobbold.

"Agents must ensure they have the systems in place to deal with arrears, while facilitating effective communication between landlords and tenants."

Some 70 per cent of tenants surveyed by PayProp said Covid-19 and subsequent lockdowns have not made it more difficult for them to pay rent - so that means three in 10 may find it more difficult.

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    Nothing like a bit of doom and gloom in our first newsletter of the season!

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    Instead of three out of ten possibly finding difficulty in paying rent, surely three out of ten should be looking for more affordable accommodation?

    As a reasonable landlord, I would be prepared to consider two alternative solutions to any tenants in such circumstances.... agree to a (very) short term arrears repayment plan or agree to a very early termination of current tenancy agreement without penalty with deposit going to cover arrears and additional costs in finding new tenants.

    Any tenants not accepting or welcoming such flexibility would, by definition, prefer the inflexibility associated with available legal remedies - and again, being a reasonable landlord,I would be happy to accommodate their preferences - but not accommodate them beyond the few days necessary to arrange to move in with friends or family.

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    100% Robert

     
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    Historically arrears in the New Year are normally because of buying too many presents & indulgence at Xmas. Don't need software to work that out.

    If all non payers moved out immediately saving the LL from bankruptcy & allowed able paying responsible tenants then more homes would be available for tenants as opposed to owner occupiers to live in & you don't need software to work that out either.

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    A single mum once told me she could not pay her rent because her daughter's Christmas was more important, by Easter she was out.

     
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    I had a single guy like this, on the benefit, doing drugs, watch blue films until 4.00 am as informed by other tenants, get up at 1.00 pm, told me he couldn't pay for Dec' or Jan' because he had to get presents for his family.

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    I hope one of the presents came in a big storm proof box!

     
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    • 31 December 2020 02:48 AM

    I trust you have started the eviction process? CCJ's and all that?

     
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    • 31 December 2020 08:18 AM

    Next time...Shoot him!!!!
    He is a thief.

     
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    • 31 December 2020 02:50 AM

    ANDREW T.;

    Well done - Quite right.....Faster the better. I would love to have seen here face when she was told she was leaving and NOW????????????????

    What did she say and do?

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    David, I had another single mum who announced one Sept that she couldn't pay her rent because she had to buy her 4 yr old's school uniform, she went also, they consider themselves the entitled, these days I avoid single mums, leave them to the council to home.

     
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    • 31 December 2020 11:53 AM

    Great. And I hope she suffered for an exceptionally long time.
    And since when did 4-year-olds wear a school uniform?

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