Reports of “Direct Action” being taken against a number of Letting Agents who advertise their properties on a “No Benefits Tenant” policy come as no surprise given the militancy of the anti-landlord brigade. Supported by Shelter and other organisations, it is likely that we will see an increase in this kind of activity as the problems with the Universal Credit system unravel (read more), and more and more landlords will be given no choice but to stop taking benefits tenants. Unless Landlords, Letting Agents and our representatives fight back with the truth about this high risk sector, the militants will successfully get their emotionally charged message through to the sympathetic ears of our anti-landlord politicians.
Any landlord who has ever rented to Benefits Tenants will know that there are genuine claimants and there are those who are the complete polar opposite, but whichever camp they are in, all benefits tenants come with a high level of financial constraints, and that is why they are high-risk. We doubt that anyone who has managed a benefits tenant would disagree that they are high risk and high maintenance, whether that is from the perspective of receiving the rent, or having to sort out the benefits paper-work, or from a behavioural aspect, there are undoubtably more issues to deal with than there is with a standard tenancy and therefore more to do and more to manage. When you add into the mix, the current turmoil in the Universal Credit system and reports that rent arrears are rocketing because the system can’t cope, you can see just why so many landlords will go stay clear of this high risk sector.
Despite what many seem to think, being a landlord is no different from any other business. It’s all about making the right decisions for the business with regards the risks the business takes or is willing to take. All business owners have to manage risk, and if they get it wrong, they pay the price, and landlord are no different. Most landlords are amateur landlords, they may own one or two properties and therefore they do not have the luxury of a high cash-flow business which could help take the hit when a benefits tenancy goes wrong. This means landlords, like banks, building societies and other businesses, must make an assessment based on the probability of getting paid. Landlords who have mortgages still have to pay the mortgage when the rent is not getting paid, they cannot do what tenants do and simply stop paying without any consequences! And landlords who do have mortgages must consider that most Buy To Let mortgage contracts have an explicit condition preventing landlords from renting to Benefits Tenants, which means if a landlord did, they would be in breach of their mortgage contract.
Where a landlords business is unique and differs hugely from many others is that if the landlords tenant choice is wrong, the cost and time of putting things right or getting back on track is huge! You cannot name another business where the provider of a service is legally required to provide that service when that service is not being paid for? And for the provider of that service to regain their service/product they must go through a series of legal steps, culminating in a court hearing, but all of this whilst still not being paid for their service! This is the reality in the world of a landlord, so if being a landlord isn’t high risk, we really don’t know what is!
We understand what Shelter are attempting to do with their emotional anti-discrimination, campaign, but they are wrong to do it without balancing the argument and addressing the main points which concern and affect landlords who do not wish to rent to benefits tenants.
Landlords (or anyone else for that matter) should never be prevented from making pragmatic commercial decisions about their business based on risk and if that risk is too high, they should never be forced into doing so by some ideological belief that they are wrong whilst others are right!