In the past couple of weeks we have seen numerous news stories claiming that the number of tenants in rent arrears has increased rapidly in the UK. Many of these articles focus on the social housing sector as due to the new spare room subsidy (more commonly known as the ‘bedroom tax’) households across the country are falling into rent arrears. Even the private rental sector is not safe from this phenomenon, especially as many people in the UK are still struggling to make ends meet. Here, we examine the best ways for landlords to deal with their tenants falling into rent arrears:
Protect your Business
At the end of the day letting properties is a business, and if you don’t make enough money then not only is it unbeneficial but also costly. Most landlords invest in buy-to-let properties using a mortgage, and if their tenants fail to pay their rent they then have to find some other way to pay the mortgage for that period of time. This is why it is so important that you protect your business using your Tenancy Agreement, as if you include information concerning rent arrears you will be both financially and legally secure.
Some landlords choose to include a clause in their Tenancy Agreements which states that if a rent payment is late then the tenant will be charged a fee; others choose to add that if rent is paid late a certain amount of times then they will begin the eviction process. No matter what you choose to include make sure your tenants are aware of your stipulations before they move into your property.
Budget for the Worst
Even late fees or the threat of eviction doesn’t discourage some tenants when it comes to paying their rent late, and so you need to prepare for this. Relying solely on your tenants’ rent money to pay your property’s mortgage is a risky plan as there are a number of reasons why that money may not come to you each month. For example, even if your tenant doesn’t fall into rent arrears you could still find the property unoccupied for a lengthy period of time.
A few years ago landlords would rely on their tenants’ deposit money to cover missed rent payments, however now deposits must be legally registered in a scheme and therefore cannot be accessed as easily. This is why you need to ensure that you have a safety net: savings that can cover certain costs should the worst happen or rent guarantee insurance that will assist you should your tenants fail to pay their rent.
Learn to Talk to Tenants
When your tenants fail to pay their rent on time you will understandably be annoyed, however taking your frustration out on your tenants could actually make matters worse. First things first is to call your tenants and mention that you haven’t received your rent money as expected; you could find that their bank made a mistake or they simply forgot and that the matter will be fixed the same day.
However, if your tenant continuously fails to pay their rent on time, or it seems impossible to get hold of them, it may be time to send them a letter outlining the situation and the consequences of if they continually fail to pay. If you are unsure of how to do this it is advisable that you talk to a solicitor (every landlord needs one!) and ask for their advice. Unfortunately, if your tenant continually fails to pay their rent you will have no other option but to start the eviction proceedings and look for a new tenant. At the moment this seems to be quite common among landlords as we have seen reports that many are choosing to evict tenants that frequently fail to pay their rent.
Due to the current state of the economy, rent arrears is something that most landlords throughout the UK will have deal with at one point or another. This is why it is so important that you protect your business and make it clear to your tenants what will happen should they fall into rent arrears.