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Tenants are in arrears when they fall behind in paying rent to a letting agent or landlord. Dealing with tenants in rent arrears is a task most landlords face occasionally.
Conflict rarely solves the problem, and the courts expect landlords and tenants to negotiate a payment plan before applying for eviction orders. Here are some tips for landlords dealing with rent arrears.
If the arrears are a one-off financial blip, you would want to try to sort the matter out with the tenant. If not, you may want the tenant to leave and may have to take the case to court to accomplish this.
Act as soon as the tenant falls into arrears to stop the amount they owe from ballooning into a sum they can never repay. Draft a statement of account that clearly shows the rent due, the rent paid, and the amount owed.
Check your files to make sure you followed the rules when starting the tenancy by giving the renter the following:
You will need this paperwork if the matter goes to court. Without these documents (except the electrical report), you may not serve a Section 21 no-fault eviction notice in England.
The first issue to look at is why the tenant is in arrears. The cause could be an unexpected one-off expense like expensive car repairs or a sudden change in financial statuses, like losing their job.
Don't overlook personal problems like drinking, drugs or gambling. It would help if you had a conversation with the tenant to pinpoint the cause of the arrears to stop the amount they owe from increasing. Not all tenants want to discuss their issues, so don't be surprised if they rebuff your attempts.
If the problem is a one-off, work with the tenant to clear the backlog. If the problem is ongoing, keep a record of the times and dates of your conversations and a brief note of the outcome. These might be useful later in court if you have to show you have tried to negotiate a solution to the arrears problem. Lastly, keep your cool when you meet the tenant.
These conversations can get emotional, with lots of anger and tears. However, don't forget you are working toward a plan, whatever the outcome, so an angry response to a tenant's outburst only clouds the issue.
The government is keen that no one is made homeless during the pandemic. Landlords should try to agree on a repayment plan with tenants in arrears. Put the plan in writing and make the terms clear:
Identify the parties to the agreement and ensure each party signs and dates the document while keeping a copy. This agreement could be a helpful document later. If the tenant breaks the agreement, you can present it as evidence in court that you tried to negotiate a settlement. In addition, the judge may ask the tenant why they did not keep to the terms. If the tenant cannot agree to a reasonable repayment plan, note this to show you made attempts.
Please ensure the repayments are affordable by taking the tenant through the Citizens Advice online budget tool. Use the rent-to-income ratio, which compares tenants' rent with their monthly income. A reasonable balance is income should exceed rent by at least 30%. Lastly, you could consider writing off the arrears to encourage the tenant to move on without taking court action. This way, you can offset the debt against rental profits if you show you have taken reasonable steps to recover the money.
Some tenants can claim benefits to top up their income. These may include back-dated sums, which the tenant could put towards paying off arrears. Ask your tenant whether they can claim housing benefits or Universal Credit. The local council may make a discretionary housing payment, also called a DHP, to help a tenant on benefits clear their arrears.
You can manage the proceedings or instruct a lawyer to act for you. Two routes are open to taking possession of a rented home on an assured shorthold tenancy –
Subscribers can download the section and section 21 (form 6a) notices by following our possession notice wizard.
In most cases, the local council will not offer to rehouse a tenant at risk of losing their private rented home. Landlords must go through the eviction process to get the court to set a date for the repossession before the council will generally act. If the tenant moves out before the repossession date, the council may argue they are intentionally homeless and may decline to help them with social housing. Expect the eviction procedure to go down to the wire, which means you must pay several hundred pounds in court fees to get the property back.
If the tenant is in arrears, it's best to leave the tenancy to go periodic at the end of the fixed term and not do a renewal for the following reasons:
If you decide to give a renewal when the tenant is in arrears, any payments received since the renewal could be apportioned to the old tenancy debt until cleared. That way, the new tenancy has a higher level of arrears, which could make claiming possession and the arrears simpler in the long run.