Some Landlord Associations have reported that increasing numbers of landlords had experienced tenants in rental arrears in the past six months, which contributed to the rise in repossession of buy-to-let properties. Hence, landlords are urged to obtain tenant referencing to reduce the risk of loss-of-rent and repossession under the current economic situation.

Under the recession, many people are experiencing and struggling with salary cut or redundancy; which have a huge effect on tenants who rely excessively on their salary to pay their rents. Recent research from a Landlords Association revealed that 37% of landlords are currently facing tenants’ arrears; and 44% of them were facing the same problem over the past six months. These figures in tenants’ rental arrears directly reflected the increase in numbers of landlords who claimed for loss of rent as reported by Letting Protection Service (LPS) - with 1,286 landlords faced runaway tenants in October 2008 compared to only 91 landlords experienced this in the previous year.

Only 50% of landlords attempted to recover the loss of rent through courts as the process takes far too long for their cases to be heard.

The above phenomenon greatly affected landlords’ “income” and is potentially associated with the significant increase in repossessions from 600 in 2007 last quarter to 1,300 in same quarter of 2008 as well as triple rise in default on mortgage repayment during the same period.

Other than that, the new Local Housing Allowance (LHA) introduced in April last year further worsens the situation as it proposed that money for rent is now paid directly to tenants rather than to private landlords, unless the local authority identify that the tenant is in arrears over eight weeks. As suggested by 24dash.com, this is prone to cause more problems for landlords since they may face repossession of their properties in the most serious case.