The New Year has got off to a good start for Britain's private landlords, with figures in Templeton LPA's latest tracker report revealing a 15.6 per cent decline in severe tenant arrears during the fourth quarter of 2012.

With rental inflation easing off towards the end of last year and the employment market improving, it seems that tenants are proving increasingly capable of staying up-to-date with their payments.

Indeed, with 16,000 fewer tenants in severe arrears in Q4 than in Q3, the final three months of 2012 witnessed the reversal of a trend that had seen the number of people in such a position increase by an average of 10.8 per cent in the four preceding quarters.

But now that the levels have dropped, it appears that Britain's landlords can breathe slightly more easily as they continue to rely on consistent payments from their tenants.

Paul Jardine, director and receiver at Templeton LPA, told Property Wire: "With many [people's] 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."

As employment conditions improved and the emphasis on paying people a living wage increased towards the end of 2012, landlords in the private rented sector were able to benefit from the decline in the number of people struggling to keep up with their rent.

Yet while tenant arrears are now at their lowest level since the end of 2011, investors still have to take steps to protect themselves against unexpected costs.

Landlord insurance policies can cover this angle, providing financial assistance in the event of urgent repair or maintenance work that landlords may not have budgeted for.