Rent arrears drop but landlords tighten referencing checks

Despite rental arrears falling, tenants may face stricter referencing checks ahead of the Renters’ Rights Act.

Data by Reposit reveals the value of rent arrears has fallen for the third consecutive quarter of 2025, at £1,824 in Q3 25, 13% lower than in Q2 25 and 23% lower than in Q1 25.

However, the firm warns the Renters’ Rights Act changes Bill increases the arrears threshold required for landlords to issue a Section 8 notice from two to three months, which means landlords could become more strict in referencing.

Arrears are happening less frequently

According to the data, arrears are also happening less frequently with cases down 29% compared with Q2.

Reposit believes the decline in arrears may be linked to a slowdown in rental growth.

While rents continue to rise, the rate of increase has eased slightly.

According to the latest Office for National Statistics (ONS) figures, average UK monthly private rents grew 5.5% to £1,354 in the 12 months to September 2025, down from 5.7% in the year to August.

Tenants may face stricter referencing and affordability checks

However, the firm warns that repossessions will become more complex under the Renters’ Rights Act as the arrears threshold required for landlords to issue a Section 8 notice increases.

Tenants must now be at least three months in arrears (previously two months), or 13 weeks for those paying weekly or fortnightly (previously eight weeks), before a landlord can effectively use a Section 8 notice to evict.

Ben Grech, CEO of Reposit, says this change means landlords will tighten their referencing for tenants.

He said: “The fall in the value of arrears and in their frequency is encouraging but it doesn’t tell the full story. Many landlords remain exposed because traditional deposits are still insufficient to cover average arrears, which now exceed £1,800 compared with typical cash deposits of £1,380.

“As legislation changes, landlords are looking for more reliable ways to protect their income.

“The combination of slowing rent growth, high borrowing costs, and new legal thresholds for repossession is creating a more cautious rental market. For landlords, this means assessing risk carefully and considering enhanced protection measures, while tenants may face stricter referencing and affordability checks to ensure tenancies remain sustainable.”

Meanwhile, wider market data for Q3 25 showed the BTL arrears rate increased very slightly by 0.1%, while Direct Debit Rejections (DDRs), a form of missed payment, fell 7.9%.

Average claims values have also fallen for the third consecutive quarter and are now at an average of £983. The number of cases has risen since Q2 but is in line with previous Q3 periods.