With everyone feeling the effect of the current cost of living crisis, which is impacting all our lives in some way, it is only a matter of time before you experience a tenant that is finding it hard to meet their financial commitments. Non-payment of rent is a landlord’s worst nightmare which can lead to huge financial loss and stress.
Good thorough pre-tenancy reference checks can help you determine the suitability of a tenant to rent your property, but they cannot predict the future. Not every tenant sets out to be a “bad” tenant. Unexpected life events, such as job loss, increase living costs or illness can lead to tenants finding it hard to pay their rent each month.
In this ever-changing legal minefield, it can be difficult to know what steps to take to minimise the effect of a tenant that withholds their rent. This guide will provide some clarity on what options you have should a tenant stop paying their rent.
Before a tenancy has even started, it is essential your properties are compliant and your obligations have been fulfilled.
Depending on whether your property is an HMO or single let, you will need to have a number of documents ready & issued to the tenant as part of your compliance checklist. These include:
- Gas Safer Certificate – renewed every 12 months by a Gas Safe Engineer – only applicable if you have gas at the property.
- Energy Performance Certificate – With a minimum rating of an “E”
- Tenancy Deposit – Confirmation the tenancy deposit has been protected within 30 days of receipt and prescribed information sent to the tenant.
- Licences – Relevant licences if the property falls within an HMO licensing area
- Agreements – Signed tenancy agreement & guarantor agreements
- Electrical Installation condition report – Renewed every 5 years
- Portal Appliance Test (Pat Test) if you provide your tenant with electrical items such as a toaster, microwave or TV
- How to rent guide – sent to the tenant at the start of the tenancy with the tenancy agreements
Failure to keep on top of your property compliance will impact your ability to gain vacant possession of the property if a tenant stops paying their rent. It is recommended that you get your tenants to sign a receipt when you are giving any of the above documents.
Keep a record of rent payments
Whether you are an independent landlord with one or two properties or a large portfolio manager with hundreds of units, it is essential to have good systems in place to aid you in tracking rent payments from your tenants. This system will play a vital part in helping you identify an issue quickly and will be required if you need to start eviction proceedings.
As soon as your rent payment system highlights a missed rent payment it is important to speak to your tenant. Have the conversation to find out why the rent was not paid on time – It could be a simple error on their part, or it could be a short-term issue affecting their cashflow.
If this is a particularly good tenant, it may be a good idea to be flexible to help them get back on track. You could help the tenant explore other ways to help, such as applying for universal credit or getting debt advice.
If your tenant simply cannot afford to pay the rent and is willing to surrender the tenancy, it may be best for all to accept this and allow them to leave early to prevent further loss. Remember to get them to sign that they agree to surrender the tenancy.
Where a tenant has a guarantor, it is recommended to contact them as soon as possible if you have problems getting hold of the tenant.
Write to your Tenant & Guarantor
Depending on the outcome of your attempts to talk to the tenant, send a formal letter demanding payment. It is recommended to send a letter after 7 days of the tenant being in arrears. If this does not work, send a letter after 14 days & 21 days. These letters will be important if the situation does not improve, and you need to either make a claim on your rent and legal protection insurance or evict the tenant yourself.
Remember to stay calm and professional during this process. Otherwise, your tenant may be able to submit a claim against you for harassing them. A tenant withholding rent does not remove their right to quiet enjoyment of their home, therefore you cannot enter the property without permission, remove belongings or change the locks. Doing so could cost you more financially.
Once the tenancy is two full months in arrears and there are no signs of improvement, it is a good idea to start the process to get possession of the property back.
There are two routes you can take to evict a tenant with Assured Shorthold Tenancies – A Section 8 notice or a Section 21 notice. It is recommended to serve both when in rent arrears.
When issuing notice, you will need to prove your property is compliant and you have fulfilled your obligations as a landlord or property manager. Failure to do so will render the Section 21 notice invalid.
If there are any mistakes with any of the notices, they will need to be reissued which restarts the notice notification period causing further delays to you obtaining vacant possession.
Go to court
After the notice has expired, you can apply to the court for a date to seek possession of your property. During this hearing, you can make a claim against your tenant for the arrears and the costs incurred to this date.
It is essential to keep a record of all costs incurred to provide to the judge otherwise they may rule against you.
Depending on the nature of the claim and the evidence you can provide, the court may order the tenant to leave by a certain date and pay an amount to cover any arrears plus legal fees. If the tenant does not leave on the specified date, you may have to instruct bailiffs to remove the tenant from the property
Alternatively, the court may allow the tenant to remain in the property if they agree to pay what is owed and abide by the conditions of the tenancy agreement.
The judge has the power to add a money judgement to cover all costs associated with the claim, including rent arrears, court fees and legal costs. If granted, you have 6 years to enforce this money judgement.
How much would it cost you to evict a tenant through the High Court?
The below example is to illustrate the potential financial impact to you or your landlord if a tenant does stop paying their rent and needs evicting via the courts.
|Possession Order (online)||£883|
|Bailiff to Enforce Possession Order||£1219|
|Unpaid rent for 5 months (based on average UK rent of £1060)||£5300|
This is under the assumption the eviction process will be done by you. If you instruct a solicitor to do this on your behalf, there will be additional costs on top.
It is important to mention that although the costs will be associated with the tenant through the money judgement, there is no guarantee when the tenant will pay this back.
Get Cover for Unpaid Rent & Eviction costs
Rent Guarantee Insurance is a legal expenses policy for landlords & property managers to cover you if your tenant stops paying their rent during the tenancy. After the claim has been submitted within the first 30-days of an issue arising, the legal team will manage the process from issuing the correct notice to instructing the Bailiffs to enforce the possession order – all while paying you the rent owed under the terms of your tenancy agreement.
If your property cannot be re-let right away, the insurer will also pay 75% of the rent for up to 2 months.
Where you have a valid claim under this insurance, the cost to evict a tenant is £0
Cover starts from just £135 for 12 months of cover with no excess and is supplied by our integrated partner Advanced Rent. Better yet you can purchase cover for all tenancies without leaving your Arthur Online Portal.
To find out more about the integrated services Advanced Rent Offer, please visit their website at www.advancedrent.online
*Disclaimer: please note this blog is only intended as a guide, and is not to be taken as legal advice*