Landlords are feeling the pinch too - David Alexander

It is becoming increasingly clear that the cost of living crisis is not just adversely affecting households that were already living on the breadline. Price rises, especially those related to energy, are hitting a huge section of the population – even those who might have thought of themselves as “comfortably off”.

Despite what some people think (i.e. through ignorance or motivated by political prejudice), residential landlords are no exception. They are feeling the pinch too – and this latest phenomenon has just taken hold as they recovered from a long period of reduced rental income brought about by the pandemic.

In addition to the rise in fuel, food and clothing costs experienced by the rest of society, landlords are starting to pay (or facing the prospect) of higher mortgages plus dearer building materials which is affecting the price of repair and maintenance (one consequence of which is dearer buildings insurance).

So what is the answer? The easy one should be simple enough: “increase the rent”.

David Alexander, head of DJ alexander

In Scotland, however, a landlord is limited to doing so just once a year, having been required to provide a notice period of three months. A tenant who considers the increase excessive has the right to lodge an objection with the rent officer although most will pay up if they consider the figure to be reasonable.

Because there are more tenants and prospective tenants than there are rental properties available at the moment, landlords should, in theory, have no difficulty imposing rental increases to cover their own extra costs. But the current squeeze on disposable incomes is the worst in 40 years and more tenants may be prepared to appeal the increase than would have been the case in the past. Even when the tenant agrees to pay up it could lead to “bad feeling” that was not there before and the end of an arrangement that had benefited both owner and occupier.

Not all tenants will be in the same boat, of course, because the flip side of the current crisis is that many employers have increased their pay rates and even, in some cases, offered three- and four-figure “signing-on” bonuses in an attempt to recruit staff.

Therefore my advice would be for landlords to look at each case individually. If the tenant is genuinely struggling then perhaps it’s better to aim for an obtainable rent rise rather than a “true” figure based on rising costs of servicing the property. This, of course, would mean accepting a net reduction in income but such a scenario is likely to be temporary with scope for making up the shortfall when – one hopes – things return to something resembling normal. And does a landlord really want the hassle of responding to an appeal by the tenant to the rent officer?

Also it is important that, in spite of their current difficulties, landlords do not lose sight of the continuing rise in capital values, from which rental properties in the usual hot spots have particularly benefited over the past two years.

As for tenants, they should appreciate that any rental increase proposed by most landlords is unlikely – at least for the time being – to be motivated by increasing profit margins; in reality their situation is more like walking to stand still. Living in accommodation that is safe, comfortable and costs no more than the local market rate should be sufficient incentive to make an effort to agree a compromise with the landlord.

Of course, even during times of low inflation there are always some tenants who find difficulty paying rent, sometimes through no fault of their own, but also sometimes due to an inability to budget properly and giving a little too much priority to the pleasures, rather than the necessities, of life. Either way the advice here is as it always been: make the situation known to one’s landlord or managing agent as soon as possible because delay always makes a bad situation even worse.

David Alexander is managing director of DJ Alexander

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