Q: The slump in house sales has led to a host of letting agencies setting up shop in recent weeks, what impact do you think this might have on the market?

A: Although there are regional variations in market trends, nationwide the lettings market is certainly busier and more competitive than it was 12 months ago. More and more estate agents are looking at diversifying into lettings in a bid to capitalise on prospective tenants struggling to access mortgages.

The move from property sales into lettings however is as much a cultural shift as it is a repositioning of the business. With a sale, the relationship with a property vendor ends but the rental sector is all about agencies fostering a longer term partnership with their clients. For new lettings agencies that are quick to make this transition in the balance, coming into the market afresh might be seen as an opportunity to establish business models that help raise the bar in service provision to landlords.

There are lots more properties coming to the market but a greater risk of bad debt from tenants. Landlords, consequently, need to receive the best advice and be offered appropriate products to combat this. Agents who provide management or rent collect services, for example, have the option of offering rental income protection as part of their monthly commission charge to landlords.

As a rolling policy, landlords then have the peace of mind of knowing that they are always protected against possible payment defaults. Agents are even precluded from Financial Services Authority requirements if they choose to take a rent protection policy in their name and pass on the benefits. Established agents can just as easily change their service model to landlords but, in some cases, may be more reluctant to do so than agents setting up their business model for the very first time. For the new kids on the block, not only is this an opportunity to take a progressive approach to their business in terms of client service, it is also an opportunity to institute the most efficient operational procedures currently available. The most user-friendly tenant referencing and policy administration software systems, for example, could save an agent valuable time.

Q: Does your prediction of a greater risk of bad debt from tenants continue to be borne out by feedback?

A: Absolutely, LetSense has been told by agents about cases of landlords having their fingers burnt by rent payment defaults. Significantly though, this is not just anecdotal at a time when negative news stories abound. According to a survey by the National Landlords Association (NLA), more than a third of private landlords have tenants who have fallen behind with their rent and over the last six months, the NLA study revealed that 44 per cent of landlords in the survey have experienced rental arrears.

Q: Presumably, in the current economic climate, this could have serious financial repercussions for landlords?

A: Council of Mortgage Lenders’ figures for Q4 of 2008 show the number of buy-to-let mortgages that were in arrears more than tripled. On top of this, the number of rental properties that were repossessed more than doubled. I am sure agents do their utmost to facilitate communication between landlords and tenants to address and tackle financial problems before they become too severe, but in this climate even the most well-meaning tenants can find themselves unable to pay their rent.

Residential lettings insurance providers can help agents protect their landlords if the have the right policies to do so, but there will be occasions when highly-geared landlords will find themselves in financial difficulty for other reasons. We should not lose sight of the fact that there will be occasions when landlords face repossession orders even when tenants have kept up to date with their rental payments. Conscious of such circumstances, the Association of Residential Letting Agents (ARLA) is calling on government to ensure lenders give tenants at least two months notice of an eviction after a repossession order has been granted. Brian Turnery is MD of LetSense, a specialist provider of residential lettings insurance and tenant referencing services for letting agents.