Rent Arrears - What Landlords Need To Know
Being a good landlord means having to deal with problems as they arise, whether it’s appliances that have stopped working, issues with neighbours or the tricky situation of handling rent arrears. You may have vetted your tenants thoroughly and to the correct procedure, but it’s not always a guarantee that they’ll pay on time. Sometimes, a tenant will hit hard times – they may lose their job, go through a major life change, or simply have a tough month with expenses - and you need a strategy to deal with rent arrears when they happen.
Whether you’re an independent or working through a letting agency, you should have a ‘process’ – a fair, regular system for dealing with arrears that you stick to for every tenant. A predetermined system proves that you treat all your tenants equally, which should help you especially if you ever face allegations of harassment. It also helps you gather evidence in a chronological order for court cases should it get to that stage.
On that topic, first things first - do not harass! Any threatening language or behaviour towards the tenant or their family and friends, even passive-aggressive acts such as cutting off supplies, will hurt your relationship with them and come back to haunt you if you have to take them to court. You have a duty to maintain your property and be professional – keep focus on the tenant’s side of the agreement, not yours.
Here’s what every strong rent arrears management system should have:
1 An entry for guarantors. You should always secure a guarantor if you feel an application is weak. If a guarantor is secured, include them in all rent arrears communications as though they are a tenant. They are owed the same information so give it to them.
2 A tenancy agreement that puts responsibility with the tenant on rent payments. You should definitely look into getting a tenancy agreement that asks for rent advances, especially if a guarantor is not an option. Most tenancy agreements will put responsibility of rent advances on the tenant, not you – make sure this is the case.
3 A commencement date of the rent deadline. The account technically enters arrears on the day the payment is due if it is not received.
4 Communications that are made one week, two weeks and three weeks after the account is in arrears, giving a polite call and letter that increases in severity each time. The letter acts as evidence of you attempting to collect rent, while the call enables you to get an immediate response. Keep records of the response you receive. Don't solely rely on emails – they are too informal and can be forwarded and distributed online beyond your control.
Once a tenant has passed through this system, you enter week four of arrears and you are now owed 2 months’ rent. At this stage, you have a right to repossess and you must prepare your paperwork. To bring the case to court, you must send a Section 8 notice citing grounds 8, 10, 11 to the tenant, along with a notice that you will commence court action in 14 days, with two days allowed for service.
Whether you have go to court with a tenant or not, chasing rent arrears can be a difficult process, both personally and professionally. This system is simple, legally compliant, neutral and effective for keeping record of arrears that can be easily referred to. At Principal Properties, we specialise in helping landlords in difficult circumstances, so if you would like some guidance please contact us and we can talk through your concerns and the services we offer.