Late payment or non-payment of rent is a large concern for most landlords, especially where the landlord has outgoings, like a mortgage, associated with the property.
Successful management of rent arrears starts long before the arrears first begin, in fact it comes right back to what is done before the tenancy begins. It may sound a little clichéd, but prevention is always better than cure. If rent arrears are a big concern for you then you owe it to yourself to do everything within your power to attract the best possible tenants. Make sure your property is in good condition so that the right people are attracted to it.
Click here for advice on reducing void periods, property damage and rent arrearsWe pride ourselves on having a strategy to find the best possible tenants for our landlords, and this starts with you giving us your sole instruction to market the property. This allows us a little more time to launch the property to the market, with better quality marketing, which attracts higher levels of interest from applicants. We then pre-screen the applicants to make sure only the most suitable ones view the property, as part of an open house event. The open house event then creates the competitive buzz that leads to multiple offers, giving you a choice so that you can select the tenants most suited to your needs – not just the first people that come along!
All of our tenants are referenced by an independent company – this company also provide rent protection and legal cover for us, so they have a vested interest in thorough and accurate referencing.
Having rent protection and legal cover in place gives you the peace of mind that, should things go wrong, you have safeguarded your income and protected yourself against a potentially large legal bill in gaining back possession of your property.
This strategy means that we have a very low percentage of rent arrears across our portfolio and is one of the main reasons that landlords trust us with their property.
It’s important to have a plan to minimise the occurrence of rent arrears, but for our customers it’s even more important that we have a robust plan in place if things do go wrong and the rent isn’t paid.
In our experience, because of the way we source tenants, we tend to find that a vast majority of people are very genuine and don’t stop paying their rent without a reason. The first thing to do is to establish the reason why. Once you understand that, you can begin to manage the situation.
The most common reasons we find for non-payment of rent can be found below. If you have any questions relating to this or any other lettings-related matters, please go to our contact form and we will be happy to help.
Maintenance Issues
Some situations are avoidable; many of the arrears situations we handle stem from other tenancy-related issues, for example, a maintenance problem that has gone unresolved for too long. Communication is the key thing here. Making sure the tenants are aware of any delays in fixing issues can often stop arrears of this nature from arising, for example – if there is a delay in a part needed to fix a boiler. It’s worth keeping in mind that tenants are not permitted to withhold the full rent due to maintenance issues, however, they are permitted to withhold an appropriate amount, providing you have been given adequate notice of the problem and reasonable time to fix it. In these circumstances, the law protects the tenant from an unreasonable landlord who refuses to undertake necessary work which is against their statutory obligations. The tenant is permitted to pay to have the issue fixed, deducting the cost from the rent due to the landlord. This must be accounted for by way of a receipt/invoice for the work completed. The landlord is then entitled to have the work inspected by their own contractor, the cost of which can be passed to the tenants to pay. This is a very rare scenario, in reality, but it is a good example of what tenants are entitled to do versus what they actually do!
Standing Order Not Set Up
When tenants move into a property it is the normal practice to take the first month’s rent and deposit payment in advance. The tenants are then required to provide details to their bank to set up the ongoing regular monthly payments. Banks will only accept instructions from the customer to set up a standing order, so we are limited in what we can do to make it happen. To get the best results we have a system in our credit control department that reminds and chases tenants to make sure they set up their standing orders in time – it’s often the last thing on their mind when collecting keys and moving in!
Changes In Circumstances
This accounts for the majority of rent arrears, reasons ranging from illness and therefore loss of income, to loss of employment and relationship splits. The tenancy agreement is there to protect you in these circumstances; where there are joint tenants they will be ‘joint and severally’ liable for the full rent payment, meaning if one tenant pays half the rent they are still legally accountable for the amount still owed as much as the other tenant is. That said, quoting the tenancy agreement and using legal terminology isn’t often the best way to begin.
Chasing & Recovering Rent Arrears
We find that a firm but gentle approach at the beginning can lead to better results compared to going in with all guns blazing! Our approach starts off friendly, but professional – the goal here is to get the tenants to talk, rather than bury their heads in the sand. We look to establish a date that they can pay all or part of the amount owed and we follow up accordingly, keeping you in the loop as things progress.
There are key dates in rent arrears chasing, 7, 14 and 28 days of arrears – these are the recommended times that you should write to the tenants to chase. We chase more frequently than this using text messages, emails and phone calls, but we also write formally to the tenants and any guarantor at these key times.
In chasing rent arrears you need to strike a careful balance in being proactive whilst not overstepping the mark, running the risk of harassing the tenants. Going too far could count against you if you have to go to court to get back possession of the property. It may sound wrong, but even if the tenants are not paying the rent they are given protection from unlawful eviction – only a court order can grant this.
If you have any questions relating to this or any other lettings-related matters, please go to our contact form and we will be happy to help.
Warning Signs
There are several things to look out for to indicate that an arrears situation is worsening:
- Rent being paid progressively later each month
- Part-payments being made infrequently
- Tenants refusing to communicate
The point of no return is usually when the rent becomes more than one month late (although we do have some great success stories where we have worked with tenants to recover more than this and have helped them to get fully back on track).
You should continually monitor the situation and have a strategy for every possibility.
Limiting Losses
If you reach the point of no return you need to take action and get back possession of the property – this can only legally be done in two ways: by a court order (this is where the rent and legal protection comes in), or by the tenants surrendering the tenancy and voluntarily vacating.
Although you can rely on the tenancy agreement as a legally enforceable agreement to the end of the agreed term and therefore demand the rent until then, you should consider the tenants’ ability to pay. A court would expect you to take steps mitigate or limit your losses, so sometimes giving the tenants the option to leave the property, so that you can re-let it, can be the best outcome all round.
In the worst case scenario, the tenants refuse to vacate. This leads to court costs and the cost of legal representation, all the time without rent being paid and you still have your other landlord obligations to meet – such as your repairing obligation.
It’s in these situations that you would be glad of having rent protection and legal cover and where the importance of finding the best possible tenants in the first instance is highlighted.
If you have any questions relating to this or any other lettings related matters, please go to our contact form and we will be happy to help.