Dealing with rent arrears - A 6 step guide for Landlords

It’s every landlord’s nightmare. For whatever reason, your tenants have stopped paying the rent and are now in arrears. If you rely on their rent to cover the mortgage costs of the property, this can be a worrying time. Even if the property is bought and paid for, that drop in income can represent a very big hole in your monthly finances.....So what are your options?

1. Talk to the tenants

It’s imperative that you open up a dialogue as quickly as possible. Even if your tenants are currently not in arrears, look out for warning signs that they may be struggling to pay. The most obvious sign is that the rent is paid late, or only partially paid. If you notice a problem, deal with it earlier rather than later, as you may be able to come to an arrangement that keeps the pressure off both parties. A late paying tenant is often better than no tenant at all.

If your tenants are already in arrears then arranging a meeting with them (if necessary through an independent third party) could help all of you come to an arrangement where the debt is paid off in instalments to avoid any further costly legal action.

2. Consider taking out landlord insurance

Landlord insurance substantially reduces your financial risk if your tenants cannot afford to pay the rent. You will need to demonstrate that you have carried out effective and thorough vetting before accepting your tenants. However, it will cover not only the cost of the arrears but can also help with any legal costs you may incur if you try to recover the unpaid rent from the tenants. Do however bear in mind that there may be limited periods of time you can claim for.

3. Make sure you know who is responsible for the payment of the rent

For private landlords, this should be relatively straightforward as the person who is named on the rental agreement is technically responsible for paying the rent. If a tenant is receiving housing benefits or the rent is partly paid by the council, you may have to liaise with the Department for work and Pensions or he local council to see why the payments have stopped.

4. Don’t get aggressive

It can be deeply frustrating if your tenants are unable or unwilling to pay their rent, but becoming aggressive or threatening them with eviction could actually lead to more problems. A tenant has certain rights that protect them from being thrown out of a property without any notice or breaching their right to quiet enjoyment of the property. If you breach those terms in the tenancy agreement you could find yourself needing to pay damages to the tenant rather than simply claiming possession of the property and rent arrears from them.

5. Wait for two months

You will have to wait for two months before you take any action to try and get back money owed to you. If no resolution has been reached by then, you can now serve your tenant with formal notice to repossess the property.  This is known as a Section 8 notice. This may be the wake-up call your tenants need to try and resolve the situation, but if they still won't (or can't) pay, then after 14 days you can start proceedings to have them evicted. You will need to have protected any deposit received from the tenant before serving the section 8 notice and be able to provide evidence of that protection to the court if required.

6. Consider taking further action

Once you have regained possession of your property, you can then think about further legal action through the court to get the money owed to you. Before you take this route consider if your former tenant is in any position to pay that money and whether the potential legal costs could outweigh the benefits of pursuing further action.

If you are in any doubt as to how to proceed or how to draft the section 8 notice, please feel free to discuss the matter with our disputes resolution team.