3 reasons why rent arrears may rise from next month

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A leading PropTech entrepreneur is warning agents to prepare for increased rent arrears from as soon as next month.

Neil Cobbold, chief sales officer at automated rental payment platform PayProp, says there are three reasons why arrears may rise.

Firstly from August 1 – that’s this coming weekend – employers who have used the government’s Coronavirus Job Retention Scheme must start contributing National Insurance and pension payments for furloughed employees.

Then from September 1 employers will be expected to contribute 10 per cent of furloughed staff’s wages, rising to 20 per cent in October before the scheme finishes at the end of that month.

Secondly, there may be further redundancies announced as companies assess their viability post-furlough.

Then, thirdly, Cobbold points out that as lockdown eases further so tenants’ expenditure may well increase – not just on pubs and restaurants but also on commuting. 

“The job retention scheme has helped to keep people employed and subsequently allowed many tenants to continue paying rent but as it starts to wind down, letting agents and landlords should prepare for more tenants to fall behind on rent again – or, in the worst case scenario, not be able to pay at all” says Cobbold.

PayProp analysis shows that the average tenant in arrears owed almost a fifth more in May than they did in January.

Having a high number of tenants behind on their rental payments is problematic, but if the percentage of monthly rent they owe continues to rise, this will compound the pressure on landlords’ finances.

“Agents need to focus on how they can recoup tenant debt and reduce the chances of arrears getting worse in a way that is affordable for both tenants and landlords. This will help them to protect their own income as well as that of their landlords in a sustainable way, given the increased financial difficulties that renters are facing” advises Cobbold.

According to PayProp, the best practice for managing rent arrears is to digitally record all payments and missed deadlines.

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Written by: Houseladder

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