Is the age of buy-to-let landlords coming to an end?

Alice Cockerell thought she had found her perfect tenant. After posting an ad for her apartment in West London online, she was approached by a man with seemingly impeccable references, including one from a wealthy aristocrat.

When she met him in person, Alice was impressed by what she perceived as his “great honesty.”

Little did the 35-year-old writer know that she had in fact just handed over the keys to a tenant from hell who refused to pay a penny of rent after the first month, costing her £31,000 in lost income.

Some 456 days later, she just managed to evict him — with the help of bailiffs.

“It took six months of unpaid rent for the pennies to drop,” Alice says. I hope I stopped checking my online bank every few hours, but he refused to leave my apartment. It was the worst moment.”

Cases like Alice’s are happening all over the country.

Between April and June 2022, landlord claims increased by 160 percent compared to the same period last year.

Meanwhile, according to the Ministry of Justice (MoJ), the number of actual property returns increased by 210 percent, from 1,582 to 4,900.

The sharp increase is due to a ban on evictions from August 29, 2020 to May 31, 2021 to protect tenants during the coronavirus pandemic.

But as a result, experts say, the system is now at breaking point as landlords face huge backlogs and delays. They warn that the courts could soon be swamped with similar cases as the cost-of-living crisis pushes more renters into debt.

Figures from the Office for National Statistics this week show that almost 39 per cent of tenants reported having difficulties paying their rent.

Paul Champlino, founder of consultancy Landlord Action, says: “We will see more repossession hearings in 2023 than before the pandemic.

“Tenants will have debt and landlords will struggle to afford their mortgages. It’s going to be a really tough year.”

Some tenants may find it difficult to show empathy. Rents are well above the rate of inflation, with 45 per cent of private renters having their rents increased last year, according to campaign group Generation Rent.

Landlords were vilified for years. But Alice’s story serves as a stark warning about the pitfalls in the increasingly shaky buy-to-let sector.

It took her six months between getting a possession order and her tenant actually vacating the property. During this time, she did not receive a penny of rent.

This is the same across the industry as figures from the Department of Justice show that the average time it takes to process a repossession claim is 23.4 weeks.

And weeks later, Alice is still discovering the damage done to her beloved apartment.

Currently, when a landlord wants to evict a tenant, they have two options: a Section 8 notice or a Section 21 notice.

A Section 8 – like the one Alice took out – applies if someone has rent arrears, has damaged property or caused a nuisance to neighbours.

Meanwhile, a Section 21 eviction is a “no-fault” process that allows a landlord to get their property back even if they have no reason to evict.

But earlier this year the government agreed to scrap Section 21 evictions entirely. This means it will be harder than ever to get rid of a tenant, and landlords could be out of pocket if they face cost-of-living pressures.

These types of evictions have been banned in Scotland since December 2017, although they remain a politically divisive topic north of the border. Oftentimes, weary landlords issue Chapter 21 notices to misbehaving tenants because they are a faster route than Chapter 8s because they require less evidence and the landlord accepts the rent arrears as a loss.

Ben Biddle, of the National Association of Landlords, said: “The Government’s proposals risk making the fight against anti-social behavior more difficult and risk seriously damaging the student accommodation market.

“At the same time, it is necessary to speed up the legal proceedings urgently.

“It takes about six months between when the landlord applies for the property to be repossessed and when it actually happens.

“It is too long when during that time the tenant may not pay the rent or engage in anti-social behaviour.”

Jaswinder Singh knows this pain all too well. The 41-year-old was forced to watch in horror as his tenant destroyed his beloved three-bedroom flat in Ilford, East London, leaving him more than £6,000 in debt in the process.

It took him more than a year—and three bailiffs—to evict her. While he applied for a Section 8 notice, he eventually got one under Section 21 as it was faster.

Warning: Experts say the system is now at breaking point as landlords face huge backlogs and delays

Says Jaswinder, “It was a nightmare. It affected everything from my family to my lifestyle.

“I had to pay the mortgage. Last year was my 20th wedding anniversary. My wife and I were supposed to go on vacation, but we had to cancel it.”

The situation is complicated by the fact that the buy-to-let sector is being squeezed to the breaking point. Skyrocketing buy-to-let mortgage rates — now at their highest since the 2008 financial crisis — and tighter lending criteria mean it’s harder than ever to make money from rental properties.

This is particularly detrimental to landlords, as many are targeting low-rate environments.

For example, low rates have made it smarter to invest in three properties with mortgages rather than one with cash.

But as landlords begin to refinance, many may find they no longer pass their lenders’ stress tests – or find it hard to find a good deal.

Frightened banks canceled hundreds of deals after former chancellor Kwasi Kwarteng’s disastrous mini-budget last month. Many cautiously began to return to the market — but at inflated rates.

And lending criteria have tightened as banks prepare for future increases in the Bank of England’s base rate. Earlier this month, The Mortgage Works began applying a minimum stress rate of 8.49 per cent to all new buy-to-let applications, up from 5 per cent previously.

The lender yesterday backed down from the move, saying it would offer a “tailored approach” to stressed rates.

Litigation: according to the Ministry of Justice, between April and June 2022, the number of appeals for the return of property increased by 210% – from 1,582 to 4,900

At the same time, rents, which were sky-high for most of last year, are also starting to fall. Hamptons Research shows that rent growth in England and Wales slowed to 6.9 per cent from a record high of 11.5 per cent in May.

Meanwhile, average rents for properties in the South East fell by 1.7 per cent on the year in September.

Landlords are also dependent on increasingly stringent government red tape. From 2025, all rental properties must have an energy efficiency rating of C or higher.

Existing leases will be in compliance until 2028. Landlords whose properties do not meet this rating can be fined up to £30,000.

Therefore, it is not surprising that they are leaving the sector in droves. Chris Sykes, mortgage broker at Private Finance, says: “This is a worrying time for many landlords and one more thing they have to put up with. The buy-to-let market has changed very significantly over the last five years.”

h.kelly@dailymail.co.uk