Finding suitable tenants and then keeping them long term can be important for the success of your rental investment. Rentguard, the NRLA’s Legal Expenses and Rent Guarantee Insurance partner, has researched what landlords can look out for in 2025 and improvements they can make to help avoid rent arrears.

1. Rising energy bills

If your tenants are responsible for paying their own energy bills, then recent rises in prices could put a strain on their finances. While Ofgem’s energy price cap decreased earlier in 2024, it has now increased by around 10% for the last 3 months of 2024. If this continues in 2025, tenants may increasingly be at risk of rent arrears or, otherwise, being unable to pay their energy bills.

Source: The History Of Ofgem's Energy Price Cap | Energy Helpline

How can landlords help tenants afford their energy bills?

If you are a new landlord or are between tenancies, then now could be a good time to assess the energy efficiency of your property. Factors to check can include the insulation in your walls, floors and loft, draughtproofing and weatherstripping around windows and doors, as well as the windowpanes, and whether they are double-glazed. You can also consider upgrading any older appliances and lightbulbs for more modern, energy-efficient ones.

These upgrades could also help you meet the minimum energy efficiency standards requirements for your rental property.

2. Rent price increases

Another cause of rent arrears can be when rent prices are too high for a tenant to afford. Various factors in both the housing market and rental market today are keeping rents high. Demand for rental properties remains inflated as many people are still unable to afford to buy. At the same time, high mortgage rates and house prices are pushing some landlords to sell up and leave the rental sector, a trend that is predicted to continue with the introduction of the new Renters’ Rights Bill and changes to landlords’ taxes.

With demand higher than the supply for rental properties, rent prices may continue to increase in 2025. While some of these factors have begun to improve in the last year, figures from Zoopla show that there are still 25% fewer rental properties available in 2024 compared to 2019, and that demand for rentals is still double what it was in 2019. As a result, the annual rent growth to July 2024 was 5.4%. Although this is the slowest growth seen in three years, it still outstrips the average annual growth in earnings of the same period, which sits at 5.1%.

While rent growth is slowing quite dramatically in major cities where rent prices are higher, more affordable areas are currently the ones seeing bigger rises in rent, further reducing the availability of affordable rentals. For example, while London rents rose just 2.5% in the last year, non-city areas are seeing average growths of 6.8% to 7.4%.

How to avoid rent arrears due to unaffordable rent prices

So, how can you strike the balance between profitability for you and affordability for your tenants? After all, increases in the cost of living are also affecting landlords, especially when it comes to mortgages, so rent increases may be necessary to maintain your rental business.

It’s important to only increase rent in line with the market rate, particularly with the new Renters’ Rights Bill 2024 coming into force. This sets out that landlords will need to serve a section 13 notice at least two months in advance in order to enact a rent increase. Any increases can only be made once per year and only in line with the market rate. Tenants will also have more power to challenge what they believe to be unreasonable rent increases without fear of eviction for speaking out against landlords. As this process will be the only way for landlords to increase rent prices, rent review clauses in tenancy agreements will no longer be permitted.

It can be important to carry out financial checks on prospective tenants to assess whether they can afford to rent your property on an ongoing basis. If there are any doubts about affordability, you may not want to put a tenant in a position where they’ll struggle to keep up with payments by agreeing a tenancy with them. It might be better for both of you if they find somewhere more affordable.

3. Unreliable tenants

While financial issues can’t always be avoided, and it can help to approach struggling tenants in a compassionate and understanding way, rent arrears and other tenant issues can also arise simply due to unreliable tenants. Tenants who are regularly late to pay rent or even miss rent payments can cause a lot of stress as well as financial burdens. Not only this, but untrustworthy tenants could cause problems such as damage to your property and its furnishings or trouble with neighbours due to disturbances.

How to avoid unreliable tenants

When choosing tenants, you can help avoid ‘the bad ones’ by carrying out thorough reference checks. Verify their identity and obtain references from previous landlords or employers, and make sure to follow up with them to get an idea of how reliable the tenant is. Performing credit checks and asking for documents such as proof of income can also help you assess whether they’ll be able to afford your property.

While some landlords leave much of the process to letting agents, such as showing prospective tenants around the property, it can also be a good idea to meet them yourself before deciding whether to let to them. This will allow you to ask them any questions you have and try to gain an impression of who they are and what they are like. While not foolproof, this first impression could help you to make the right decision.

4. Increased void periods

As well as rent arrears, void periods can be another threat to your rental income. This refers to the period that your property remains empty between one tenant moving out and another one moving in. As part of the Renters’ Rights Bill tenancy reform, fixed-term assured tenancies will no longer be allowed, with all tenancies needing to be periodic. This is being put in place to help tenants avoid getting stuck in a tenancy for a fixed period, such as 12 months, when the property turns out to be substandard or unaffordable, or if they end up in a difficult landlord-tenant relationship.

This means that tenants will be able to end their tenancy at any point by giving two months’ notice. A result of this could be that landlords have less security when it comes to rental income. Previously they may have known that they would be receiving rent for at least the next 12 months, for example.

How to minimise void periods

Although tenants will be able to give notice on their tenancy at any time, you can still take measures to make them want to remain in your property for longer periods. By treating your tenants well, respecting their privacy, communicating effectively with them, and responding quickly to any issues they have with the property, you can build an environment in which they will want to stay long term.

When tenants do decide to leave their tenancy, it can be important to be proactive and use the 2-month notice period to secure your next tenant. Start advertising the property for rent as soon as you can so you can start showing prospective tenants around, ensuring to give the current tenants notice of any viewings. Already having a tenant lined up for when the current tenancy ends can help you avoid any financial losses caused by long void periods.

It can also be a good idea to use void periods to your advantage, using this time to make any improvements and repairs needed in the property. Making sure your property is up-to-scratch for the next tenants could increase your chances of keeping them as long-term tenants, and thus reducing future void periods.

Legal Expenses and Rent Guarantee Insurance from Rentguard

You can take every step to make your buy-to-let investment successful, but despite your best efforts, some situations are unpredictable. Legal Expenses and Rent Guarantee Insurance can help to provide peace of mind that if issues out of your control occur, such as a tenant failing to pay rent and remaining in the property, you have suitable cover in place.

Or speak to our specialist team on 0333 000 0169.

The sole purpose of this article is to provide information on the issues covered. This article is not intended to give legal advice, and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. We make no claims as to the completeness or accuracy of the information contained herein or in the links which were live at the date of publication. You should not act upon (or should refrain from acting upon) information in this publication without first seeking specific legal and/or specialist advice. Arthur J. Gallagher Insurance Brokers Limited trading as Rentguard and National Residential Landlords Association, an Introducer Appointed Representative of Arthur J. Gallagher Insurance Brokers Limited, accepts no liability for any inaccuracy, omission or mistake in this publication, nor will we be responsible for any loss which may be suffered as a result of any person relying on the information contained herein.

National Residential Landlords Association is an Introducer Appointed Representative of Arthur J. Gallagher Insurance Brokers Limited, which is authorised and regulated by the Financial Conduct Authority. Registered Office: Spectrum Building, 55 Blythswood Street, Glasgow, G2 7AT. Registered in Scotland. Company Number: SC108909. Rentguard is a trading name of Arthur J. Gallagher Insurance Brokers Limited.

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