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LAT: Dealing with Rent Arrears

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The Landlord Advice Team (LAT) is back with their second in a series of expertly written articles from the RLA member magazine: the Residential Property Investor (RPI). This time, rent arrears are considered. A tenant falling behind on rent is one of the trickiest problems, says the RLA’s busy advice team.

Further to our previous two articles, let us now look at the problem of rent arrears.

There are many reasons why a tenant may fall into arrears. These can range from changes to their employment situation or personal problems to housing benefit issues and with more changes afoot to the benefits system, this situation will only become worse.

In most cases, a landlord or agent should be telephoning, texting or visiting the tenant within two or three days of the rent due date if the rent has not been received.

Often a gentle reminder is all that is needed, or it could be something very simple like a bank transfer payment being submitted late.

It may be that the landlord or agent has a good working relationship with the tenant and is able to resolve any arrears issues by helping them through their current financial difficulties and encouraging them to agree a payment plan.

However, if such a strategy fails, follow up any conversations in writing. For guidance with this, there are rent arrears letters on the RLA website.

Click on ‘Docs’, ‘Managing a Tenancy’, Landlord Letter Packs, and in here you will find two letters. One is a ‘friendly’ letter and the other is a ‘less friendly’ letter. You may edit these letters to suit your situation.

What is important is to follow up conversations, messages and letters.

Neglecting to do so may result in the arrears becoming so large that the tenant has little or no chance of ever bringing the rent up to date.

If your tenant is supported by a guarantor, do ensure you copy them into any correspondence, including the rent statements, and keep them apprised of your tenant’s situation.

Continued failure to bring the rent up to date will leave a landlord with little option but to consider suing the tenant and/or guarantor if applicable.

If you enter “moneyclaim” into the Google search engine, this takes you to the court service website where you can sue for the recovery of money owed, up to a maximum of £10,000.

Before embarking on this action, though, do consider whether the tenant actually has the financial ability to pay the money if sued. The old adage of “not getting blood out of a stone” might apply. If that is the case, there is no point in a landlord paying out court fees when there is no prospect of recovering any money.

Another alternative is to use the court form Section 8 for rent arrears and rely on grounds 8, 10 and 11 to pursue the tenant through the county court for both the arrears of rent and for vacant possession of the property.

The document referred to as “Section 8 rent arrears” is already partly completed. Do be mindful, though, that this can be a lengthy process as tenants can challenge the grounds on which this application is made.

In these situations a landlord will need the help of a solicitor to achieve a successful outcome.

Above all, when it comes to rent recovery, act quickly and always follow up.

RLA members should not hesitate to contact the RLA’s Advice Team for further clarification on any of the points or sign up for one of the RLA training courses.

Feeling the Squeeze?

Although official statistics show that rents are not rising, many of the headlines say otherwise. For example, according to the National Housing Federation, almost a third (31%) of private tenants in Britain are struggling to pay their rent.

However, Government figures show that in real terms – compared with inflation – private rents have actually been falling.

So, is your tenant of the “can’t pay” or “won’t pay” variety? If the former, then the tenant will be as worried as the landlord. They may offer to end the tenancy early, which can be the best solution for both parties, although this may well not get you back the rent you are owed. Also, landlords must be very careful not pressurise tenants into agreeing to leave, as this could be viewed as harassment or an illegal eviction.

Landlords should also remember that they cannot end a tenancy because of rent arrears without a court order. Only a court can end a tenancy agreement on the basis of nonpayment, and even then, the landlord can only regain possession of the property when there have been two months of arrears.

With rent arrears, prevention is key: thorough referencing of prospective tenants is essential and should not be skimped. Ask to see pay slips and bank statements, get a reference from the employer and, importantly, from any existing or previous landlord.

Thorough checking will not, of course, prevent the possibility of a tenant’s circumstances changing, but it is every landlord’s best chance of avoiding problems later.

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3 Comments

  • I have only a very small portfolio of properties – just 3 houses in total. Two of them are rented out to families on Housing Benefit. Both tenancies started well before 2008. Due to Housing Benefit payments being reduced – or at best – levelled out – it has not been possible to increase the Rent in all that time. If anything, in real terms I have had to accept a substantial loss. They are good families – both of them working but needing a H/Benefit top-up. So I try to offer them the continuing benefit of a good house in a good area. The properties are in desirable locations, and if I were to rent them out in the private sector, I would gain at least another £200 per month (per property). With the outgoings ever increasing, it becomes an uphill struggle to maintain these properties in a good state of repair. Sadly the Rent received does not cover the expenditure of new kitchens and bathrooms – which I am able to provide on my remaining house which does not have Housing Benefit tenants in. Recently I put a “small ad” on Gumtree offering a (very) good quality house for Rent. I was inundated with the response from private Renters as well as Housing Bernefit applicants. Sad to say, I was not able to afford to offer the house to H/B applicants – since in this case the rent was at least £200 pcm more than the council provide. Having spent £thousands on new kitchen, new bathroom, every room totally replastered, new central heating etc etc, I cannot afford to offer said house to Housing Benefit applicants. Often folk will say that they will “make up the shortfall” – but this then proves impossible for them, and it is the Landlord who has to take the hit. I am retired, and it is very hard work helping vulnerable Tenants to maintain their tenancies. When they vacate – it is unlikely that I will be able to continue to subsidise applicants on Housing Benefit – many of whom have no Deposit, so any Rent Arrears that accrue are not recoverable. Shame.

  • Housing arrear is among the trickiest and most controversial topic in the whole rental property niche IMO. The fact that the real estate landlord could not end a tenancy simply because of due rent is often used by unloyal tenants and I’ve seen it happen more than a few times already. I myself have been setting up preparations and funding for my very own first buy-tel-let London dwelling and I really work hard to fit in both’ sides’ shoes, since it is the only way to successful rental property management..

    Thus why it is of crucial importance too follow and maintain a stricty policy and routine measures in order avoid all that could be. Landlords should develop a specific set of protocols in case of due rent. An standart sms note, email, informative call if the problems persists, despite all forms of common sense, one has to be ready to DO what MUST be done. I would love to be the helpful and understanding landlord but if my tenants even think of being unloyal I’ll @#!!%

    Kind regards!

  • We need much toughler laws on rent arrears. They should be made a criminal offence as, after all, it is really STEALING.

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