The number of tenants in severe arrears has fallen for the first time in over a year, according to the latest Tenant Arrears Tracker by Templeton LPA, the specialist practice of LPA Receivers.

In Q4 2012, the number of tenants in arrears of more than two months fell by 15.6% on a quarterly basis, in contrast with the trend in the preceding four quarters, where severe arrears rose by an average 10.8% per quarter.

The number of tenants in severe arrears fell by 16,000 in the fourth quarter to 86,000 which is the lowest level since Q4 2011 and it leaves the level of severe arrears cases 9.2% lower than the average for the previous four quarters.

While severe arrears cases (tenants with arrears of more than two months) fell back rapidly, there was also a wider improvement in tenant finances as LSL’s latest Buy-to-Let Index, shows that overall tenant arrears fell in November, with 7.4% of all rent late or unpaid. This compares with 8.1% in the previous month.

Paul Jardine, director and receiver at Templeton LPA, said: “Tenant finances have suffered a grueling combination of rising living costs and rental inflation throughout much of 2012. With many budgets balanced on a knife edge, a slight reprieve from rapid rent rises towards the end of the year has been very significant. But the recent strength of the labour market has played the biggest role in halting the upwards climb in the number of tenants in severe financial difficulty.

“Unemployment has fallen dramatically to 7.8%, and with 44,000 more full-time jobs in the three months to November, fewer households have faced seeing their monthly income halted and their ability to meet the monthly rent cheque hampered. If the UK economy can avoid falling into a triple dip recession in 2013, a further improvement in employment levels will go some way towards preventing arrears cases from rocketing up.”