The increasingly deepening recession is good news for tenants still in employment, but not so good for landlords as the rental market goes through a period of readjustment to a new economic reality.

For those tenants hanging on to their jobs, many are renegotiating big rental discounts. And for those that find themselves being made redundant, they are resorting to missed payments, leaving the properties quickly, or driving their payments down.

And for landlords not wishing to adjust to an average reduction of around 20 to 30%, they have to face up to losing tenants and re-advertising in a very competitive market which is suffering from over-supply.

So landlords are losing hundreds of pounds as their tenants take steps to bring their costs down.

And the Royal Institution of Chartered Surveyors said that too many properties available to rent were having a detrimental effect on rents. Corporate demand for rental properties has almost come to a halt and with people unable, or unwilling, to sell because of the poor market, many have chosen to rent instead.

There is also evidence of some tenants being particularly demanding, effectively asking landlords to pass on the benefits of lower interest rates – and therefore lower mortgages payments – onto them in the form of lower rents. Observers see this as a particular new tactic, as though tenants feel they should share in the lower interest rate environment. And with the rapid expansion of the buy-to-let market before the recession, a lot of tenants are aware that their landlords are individuals with mortgages that in many cases are becoming less expensive.

A favourite tenant tactic when negotiating is to secure a price on a new property, then use that in following negotiations with their present landlord, making it clear that if they don’t reduce the rent, then they will move, leaving the landlord to find a replacement.

Although ironically, the fact that mortgages have dropped so much, means that some landlords have been able to dig in and resist some of the wilder reductions asked for by their tenants.

And in order to anticipate a re-negotiation, some agents are advising their clients to offer their tenants a 10% decrease, almost as a goodwill gesture and one that might stave off an argument for more.

Some London agents are reporting rent drops of around 15% in the last year, with up-market properties suffering the worst of all, with falls of as much as 30%, especially with corporate tenancies.

Others are saying that although tenants are asking for reductions, and others are under threat from the recession, defaults have not yet become a major problem, although this might change as things get worse.

Much will now depend on how many tenants start to default, or how many landlords are forced to play ball in the future by reducing rents. Interest rates cannot fall much more, the costs of being a landlord will not have decreased dramatically, and a point will be reached when renting becomes unviable. But for many buy-to-let mortgage holders, they may have no choice but to give-in to their tenants.

And if the property market were to fall even further, then many tenants might find the tables reversed and their landlords being repossessed, leaving them to move out without any recourse to the law whatsoever.

Guest Article by Neil Camp