Arrears - a dreaded word among landlords and, for anyone with even a mildly British temperament, an often uncomfortable situation to discuss and resolve.
We’re fortunate enough to have very few tenants behind with their rent, but we also know the current economic climate could throw anyone’s finances off course.
As the cost of living crisis bites, household budgets are getting squeezed, and rent arrears are more of a threat. It may never affect you, but if your tenants do stop paying their rent, you need to act quickly to prevent the situation from spiralling out of control.
With that in mind, this week’s blog contains everything you need to protect yourself from the start, find solutions to financial hiccups, and recover what you’re owed.
The best way to prevent rent arrears from building up and causing you financial woe is to set your tenancies up correctly and securely. This includes:
It’s good practice to check your bank statements religiously on the first working day after the rent is due. A missed payment doesn’t automatically mean your tenant has gone rogue: it could be nothing more than a personal oversight, bank error, or short-term financial glitch.
Nonetheless, it’s essential to act immediately and stop one month’s late rent from turning into two or more. Follow this simple three-step process to get your rent up to date asap:
1 Start with a gentle-but-firm reminder text or email asking your tenant to check with their bank if the payment has gone out, or if they know why the rent wasn’t paid.
2 Follow up with a phone call if you receive no response or rent within 24 hours, then with a formal letter if you’ve not heard back after several days. Usually, this works.
3 Make a plan – ideally, your tenant will get their rent up to date right away, but if they don’t have the funds right now, can you settle on a payment plan over a few months?
Whether it’s a one-off thing or your tenant is prone to paying a few days late, knowing that you’re on the case can be all they need to pay on time and avoid the embarrassment of being chased up.
Tenants can fall into arrears for any number of reasons. A relationship break-up, losing their job, becoming ill or simply having trouble with the increased cost of living can quickly put anyone into financial difficulty.
Although these conversations can be uncomfortable (a big reason why landlords use managing agents), the first step is to get total clarity on your tenant’s situation. A compassionate nudge around their finances could lead to a solution they may not see on their own.
If your tenant says they can’t afford to live at your property anymore, remember that you can use their security deposit to make up some or all of the unpaid rent. For tenants who don’t respond to your attempts to get in touch, it’s time to move on to the next step.
Sometimes you have no choice but to take back possession of your rental property. Perhaps your tenants need you to evict them so they can get local authority housing, or they could simply be refusing to pay what they owe.
Depending on the circumstances, letting your tenants out of their contract might be the easiest route, so you can re-let your property and start earning income again. You’ll also create a path for your tenants to pay you back by moving somewhere cheaper or in with family.
Otherwise, if your property is in England, Wales or Northern Ireland, you could serve the following:
In Scotland, there’s currently a limited ban on evictions, but you can still apply for an eviction order to enforce after the ban subsides. However, the ban doesn’t apply if:
Remember: if you do need to start legal proceedings, it’s vital to serve notice in the correct way to avoid being dismissed by the court and having to start again.
Regaining possession of your rental property is one thing, but recouping any unpaid rent is a different process. Ideally, your tenants will start paying you back after they leave, but if that’s not the case and you wish to claim through the County Court, here are some things to note:
Given this lengthy legal obstacle course, it’ll probably come as no surprise that many landlords choose to simply move on without chasing unpaid rent. It’s far from ideal, but at least they have their property back and producing income.
What’s your next step?
If you’d like some advice on getting your tenants back on track with their rent, or if you’re looking for a managing agent in the Wilton & Salisbury area to take care of this sort of thing (and more!) for you, why not get in touch?
Call us on 01722 580059or email us at email@example.com for some landlord love.
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