Landlords urged to carry out financial checks on tenants

by Daniel Jones

Landlords should carry out thorough financial checks on prospective tenants before signing any new tenancy agreements next year. This is the advice from the Association of Residential Letting Agents (Arla) as it publishes its predictions for the private rented sector (PRS) in 2012.

Concerns over the economy and rising unemployment raises questions over the financial stability of tenants, the organisation says. "While it is impossible to know whether someone will be solvent in the future, it is important to carry out relevant checks on a potential landlord or tenant, to look for signs of financial instability," notes Ian Potter, operations manager at Arla.

Overall, Arla says there is a mixed outlook for the PRS in 2012, and suggests that there will be further imbalance between supply and demand. The indications are that rents are rising off the back of a shortage of rental properties, and this trend is likely to continue.

The government unveiled a package of measures in its Housing Strategy designed to get the wider housing market moving.

Mr Potter cautions, however, that "it will take time for the measures to have an impact, and in the meantime the issue of a severe lack of stock will continue to affect the PRS well into 2012, particularly in London and the south-east".

Almost three-quarters of Arla members (74 per cent) already report that there are more tenants than available properties, he says, adding that "this is a story we're likely to see worsen".

Meanwhile, next year will also see landlords given 30 days in which to protect a tenant's deposit, rather than the current 14. The reform is part of amendments to tenancy deposit protection in the Localism Act 2011.

The Residential Landlords Association (RLA) notes that the changes were made following court cases over the rights of a tenant to sue for a breach of the deposit protection legislation or when deposit money was not protected within 14 days, but by the time of a court hearing.

"The revised legislation also does away with mandatory penalties of three times the deposit if the deposit is not correctly registered and the‘prescribed information not properly given," the RLA explains.

Published on: December 20, 2011

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