The gainers are those who have no desire, or no requirement, to cash in their investment. For a variety of reasons, demand from tenants is on the increase and, consequently, so are rents. As prices have stalled, rental yields (in relation to house values) have seldom been better.
Those not so fortunate are the landlords who need or want to sell on their investment but are unable to do so due to a combination of lack of buyers and disappointing capital values.
At times like these, the last thing anyone in the latter category needs is the possibility that their tenants start to default on their rents. But that is exactly what is happening, according to Axa.
Research commissioned by the insurer found that 13 per cent of private tenants have gone into arrears in the past 12 months, with more than half of these doing so in the past three months alone. Meanwhile, more than 50 per cent are said to be increasingly concerned about being able to afford their rent going forward.
These statistics do not surprise me. During periods when the economy is healthy and jobs are plentiful, the small minority of bad debtors in the rental sector tend to be what I would call chancers – the "can pay, won't pay" brigade, who seem to absolve themselves of their social responsibilities not just in housing but in other walks of life as well.
However, with inflation rising and the number of jobless increasing, it is inevitable that those falling into arrears are increasingly ordinary, decent citizens.
Whether a tenant goes into arrears through design or no fault of his or her own, the outcome for the unfortunate landlord is much the same: a drop in income, usually accompanied by a fair amount of hassle.
The best way for a landlord to avoid falling victim to this outcome is to appoint a management agent, preferably one with substantial experience. Of course, an agent can recommend (or not recommend) a tenant for a particular flat or house, but the final decision rests with the landlord. This is where ordinary common sense should play a big part in avoiding exposure to rent arrears. Private residential landlords need to take a cue from the commercial property sector, where the standing and reputation of an office or retail tenant is just as important (in fact perhaps more so) than the amount of money paid in rent. In other words, they should not necessarily look for the highest rental, but for the best covenant.
When a tenant with a previously good record starts to struggle with rent, most owners will attempt to reach a compromise if the tenant's difficulties are thought to be temporary. At the end of the day, however, buy-to-let is not a charity and if the situation is irredeemable, then an eviction notice may be the only option.
This is why any tenant in financial difficulties should contact their landlord (or agent) as soon as possible because the situation may not be as bleak as it appears. Also, by warning the landlord before things get out of hand, the tenant is likely to be treated more sympathetically.
But perhaps the best solution for tenants is in their own hands. The Axa survey also revealed that 95 per cent of those in privately rented accommodation had no kind of income protection insurance to help out if their financial situation was to alter through losing their job.
It seems pertinent to ask why so many more home owners than private tenants have income protection insurance. After all, the ultimate consequence of non-payment is the same for tenants as homeowners – they lose the roof over their heads.
• David Alexander is sole proprietor of letting and estate agency D J Alexander
THE SCOTSMAN, 23 August 2008