INSURANCE Olympic pickings
With overseas visitors starting to make their accommodation arrangements for the London Olympics, the let-property insurer PropertyRisks is warning agents to be on the alert for illegal sub-lets which could invalidate insurance cover and leave both landlords and tenants unprotected. Sums like £2,500 per week for a one-bed flat in Stratford or £6,500 per week for a four-bed house in Berkshire are being quoted and tenants may be tempted to cash in on the Olympics. However, as head of PropertyRisks Nigel Atkinson warns, there are pitfalls, “Quite apart from the implications it could have on a tenancy agreement, from an
ARREARS Rocketing rents trigger surge in arrears
The number of court orders to evict tenants went up by 9 per cent in the last year as landlords became less lenient and record high rents pushed up the number of tenants in severe arrears by 13 per cent. The number of tenants in
severe financial difficulty has climbed rapidly in the last quarter, with nearly 8,700 more tenants over two months in arrears, according to recent research by Templeton LPA. To the back end Q2 2011, 74,492 tenants in England and Wales were in severe arrears – a 13 per cent increase compared to 2010 . This also represents an increase of 4 per cent compared to 71,483 in the previous quarter. Nevertheless, tenancies in severe arrears represent just 2.1 per cent of all properties in the private rental sector in England and Wales. The growth in tenant arrears has been mirrored by a rise in the number of tenants being evicted through court orders. In the last quarter, 24,170 tenants faced eviction notices – an increase of 9 per cent on the 22,091 a year ago. But the change is not just annual. In Q1 2011, there were five per cent more than in the last quarter of 2010.
100,000 90,000 80,000 70,000 60,000 50,000
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2008
2009 Graph 1: Tenants in long-term arrears.
27,000 26,000 25,000 24,000 23,000 22,000 21,000 20,000
2009 Source, Ministry of Justice 2010 2011 Paul Jardine, director and
receiver at Templeton LPA comments, “There’s no denying that tenant finances have been under mounting pressure in the last six months. Rents have risen consistently in the past year to a record high, and the cost of living is taking its toll. This is causing many tenants on lower incomes to fall further behind with payments. But with demand so strong for rental properties, landlords are less lenient with arrears, and seek court orders to remove non-paying tenants before they themselves fall into mortgage arrears. “The increasing number
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2008
2010 Graph 2: Landlord possession claims leading to a court order. 2011
of tenants struggling to meet the monthly rent has yet to filter through to landlords’ ability to pay the mortgage each month. In part, this is down to the change in mentality of landlords, who are acting earlier to identify and resolve payment issues or remove difficult tenants. But with rental incomes at record highs, many landlords have taken the sensible action of setting aside slush funds or buying rental guarantee insurance – which have born the brunt of any non-payment.”
PROPERTYdrum AUGUST 2011 59
insurance perspective, this form of sub-letting would be regarded as unauthorised and tenants’ contents cover could be voided. The tenant would have to carry the cost of any loss or damage to their own property, and they would also potentially be responsible for cost of replacement of or repair to landlords’ fixtures and fittings.” PropertyRisks points out that
with the sums on offer, some tenants may still be tempted to
take the risk and hope to cover themselves with a damage deposit,. On one website listing properties to rent, a typical level of damage deposit is £1,000. However, some of the occupancy levels being suggested considerably increase the possibility of damage and if major items such as carpets had to be replaced, the cost could easily erode the potential profit. “Some of the most popular
areas for Olympic rentals are places like Docklands and
Greenwich where there is a huge volume of rented property. It is inevitable that there will be unauthorised sub-lets when you are seeing sums like rental plus 70 per cent being suggested. Our advice is that agents alert their landlords to the possibility and recommend that they have appropriate legal expenses and rent guarantee cover. Importantly, they should also warn tenants that they could jeopardise their tenancy if they succumb to the temptation to sub-let.”
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