With the cost of living crisis and soaring rents hitting tenants’ pockets hard, landlords need to be more cautious in protecting their rental income.

700,000 UK households missed rent or mortgage payments in April 2023, with missed payments especially high amongst tenants. Another indication of financial struggle can be seen in figures reported by council landlords, 85% of whom state that their rent arrears are higher. In fact, arrears in the sector rose by 23% in the past year.

Average monthly rents outside London hit a record level in the first quarter of the year, reaching £1190, whilst tenants in London paid more than £2500 for the first time, according to Rightmove.

Cost of living pressures on renters

The situation is even worse for many tenants than it was in March 2022, when a Citizens Advice report already warned of cost of living pressures hitting renters hard. It talked of rent growth that had been the fastest in five years, leaving one-in-six renters worrying about how to pay their rent over the second quarter of the year.

The report highlighted how one-in-three renters lost income during the pandemic and only 55% of private renters had savings, as opposed to 81% of owner occupiers. 58% of renters who were in rent arrears were also behind with their energy bills.

Landlords with rent collection issues

For residential property landlords, there should be warning bells, especially in times of great employment uncertainty. A tenant could easily find themselves without the means to pay their rent, leaving a landlord out of pocket and facing financial losses. If things progress to an eviction process, that can be long and drawn out, leading to a long period of time in which no rent is being received from the property.

With mortgage rates having rocketed, the landlord is often, meanwhile, facing hiked costs of their own, despite having no rental income coming in.

Insurance for landlord rental income

Against this backdrop of economic uncertainty, it pays for residential landlords to consider insuring their rental income so that, should the worst occur and a tenant default, there is a means of claiming the rental income that should have been paid via the insurance policy.

Whilst it may be possible to simply purchase cover for this aspect of landlord protection, the legal process that can surround eviction for rent arrears can be expensive, due to its protracted nature. For this reason, having a comprehensive ‘landlords legal expenses’ insurance policy can be more beneficial. It can then protect a landlord’s assets and income in a variety of ways, offering up to £50,000 for all legal costs.

Insurance to cover costs of rent recovery

This policy will step in if a landlord needs to take rent recovery action and enables them to take legal action to secure their rent and handle the eviction process. Should the tenant cause property damage, it will recover the costs of putting such damage right. The policy will also help mount a defence, if any criminal charges are brought.

By then adding rent guarantee cover, a landlord can gain assistance in reclaiming unpaid rent over a period of up to six months in duration (or up to £10,000 in money terms). Upgrading the policy will also provide a landlord with legal costs’ protection that facilitates the pursuing of actions that could include the removal of squatters.

Peace of mind for landlords

Given the cost of living crisis and soaring energy bills, this robust package of landlords’ protection can offer peace of mind to any landlord who has remained in the property market, despite all of its challenges in recent years. It will help continue to make it viable to be a landlord and take a lot of the strain out of the role.

With access to a 24-hour claims helpline and professional advice service delivered by a nationwide panel of solicitors, it can also be beneficial in terms of preventing issues and disputes from becoming more serious, thanks to steering a landlord down the right legal path.

To find out more about our landlords legal expenses protection, please call 0113 244 8686.

Footnotes

https://www.theguardian.com/money/2023/apr/28/average-monthly-rents-hit-2500-in-london-and-1190-for-rest-of-uk

https://www.insidehousing.co.uk/news/council-housing-rent-arrears-rise-significantly-survey-finds-82573
https://www.citizensadvice.org.uk/Global/CitizensAdvice/Housing%20Publications/Renters%20and%20cost%20of%20living%20output%20.pdf