It’s one of the biggest headaches for landlords – recovering rent arrears from non-paying tenants. But there are legal ways that landlords can deal with rent arrears.
While no one enjoys chasing money from non-paying tenants, it doesn’t have to be such a painful process.
Solicitor Danielle Hughes, of Kirwans law firm, says: “Many landlords are worried that their tenant will stop payments altogether if they miss one payment, and so they make the mistake of aggressively pursuing rental arrears.
“But there are always two sides to the story. There is often a good reason why tenants can’t or won’t pay rent on time, and the sooner you find out what the problem is, the sooner it’s likely to be solved.”
The following steps offer hints and tips on how landlords can pursue missed rent payments and how to avoid problems in the future.
However, Just Landlords reminds all landlords that the best way to protect yourselves against non-paying tenants is with Rent Guarantee Insurance. Our policy covers rent arrears of up to £50,000 for an unlimited period. Get a quick quote online here: https://www.justlandlords.co.uk/rentguaranteeinsurance
- Find out what’s gone wrong
Try to make contact with the tenant as soon as possible after the first missed payment. Always adopt an open and co-operative approach, rather than being aggressive and threatening. Remember that there are many reasons why a payment might have been missed; the tenant could have lost their job or been unable to work through an illness.
Discuss with the tenant whether they are entitled to housing benefit. They may have a pending application or need help submitting one. It’s also possible to apply to the council for housing benefit payments to be paid directly to you. By working together, you will reduce stress and potentially losses for you and your tenant.
Beware: Be careful to strike the right balance, as contacting the tenant often to discuss a missed payment could be classed as harassment under the Protection from Harassment Act 1997 – then you’d be the one in trouble. If the tenant isn’t open to discussing the issue, don’t push them.
- Keep a record of everything
It may be time consuming, but any contact or attempted contact with the tenant should be properly documented. Whether it’s visits to the property, telephone calls, emails, letters or texts, all forms of contact must be recorded, with copies made of each letter sent, as you never know when you might need them. If the case goes to court, they will require an explanation of what steps you’ve taken to recover any arrears.
Beware: Tenants are usually jointly liable for the rent, but there are occasions where one tenant will try to conceal the arrears from the other(s). Always address letters to each tenant separately, to ensure that all concerned are fully aware of the situation.
- Give reasonable notice when visiting the property
The law states that tenants are entitled to quiet enjoyment of the property – whether they pay rent or not. Your tenancy agreement should contain guidance on how to arrange visits to the property. Be sure to check what is stated, as you could be in breach if you turn up unannounced. If access to the property is refused, keep a note of the circumstances with times and dates of refusal.
Beware: If your tenancy agreement does not stipulate how much notice must be given, you should provide reasonable notice, which is generally accepted as being around 48 hours. Again, make sure you don’t breach this, as you could fall foul of harassment legislation.
- Check your tenant’s financial circumstances
It may be a sensitive subject, but it is not unreasonable to request details of your tenant’s incomings and outgoings. You should set a deadline by which your tenant must submit this information to you (for example, 14 days). This exercise can prove very useful in helping the tenant manage and prioritise their debts, as well as assessing how much they can afford to pay.
Beware: You may find that your tenants are reluctant to provide this information, but it’s worth pursuing them in order to build a clear picture for both parties on whether this is a short-term problem or long-term issue. You can then make a joint decision on whether it is affordable and sustainable for the tenant to remain in the property.
- Offer solutions
It’s likely that your tenant is feeling just as concerned about the missed payment as you are, so try to work with them to find solutions. For instance, suggest that the tenant continues to pay the rent, as well as an additional sum for the rent arrears that can be spread over a number of weeks or months. They may, for example, pay an additional £75 per month for six months to make up a missed payment of £450.
Beware: Always clearly document the agreement that has been made and be realistic about the tenant’s affordability.
- Keep track of payments
It is essential that you keep an account of rent payments. Provide tenants with quarterly rental statements, documenting all payments made and missed, including a running total of any arrears. If payments are made in cash, produce a receipt and have both of you sign it.
Beware: Failing to provide tenants with regular rental statements can lead to confusion and dispute later down the line over amounts paid and the level of rent arrears.
- Take legal action if necessary
If you’ve taken all the steps explained above, but there is still no sign of payments being made, you might want to take legal action to evict the tenant. The two most common forms of notice are under section 8 and section 21 of the Housing Act 1988 – the one you serve will depend on the circumstances surrounding the case.
If the tenant vacates the property without paying the rent arrears, you have six years from the date of the missed payment to pursue the tenant via separate debt recovery action.
Beware: There has been a growing number of cases of landlords trying to issue their own notices or using forms they’ve found online, to only find out further down the line that the notice was invalid and unenforceable. This can lead to a significant delay and yet more rent arrears. There have been many important legal changes in this area over the past year, so always speak to a legal expert to ensure that any notice served is correct and properly drafted.
- Speak to the guarantor
If there is a guarantor named on the tenancy agreement, contact them and remind them of their legal obligations. As with the tenant, similar steps to those detailed above can be taken.
Beware: Again, too much contact can be considered harassment, so tread carefully in terms of how often you get in touch with them.
While we hope that you never have to deal with non-paying tenants, following this advice will help to resolve the issue as quickly and effectively as possible.