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A tenant falling into rent arrears can be problematic and disruptive. Generally, speaking landlords have their own sets of bills to pay and property costs to cover. It is especially problematic for landlords who are reliant on rental income for living costs.
The best way to handle rent arrears is to prevent it from happening. There are various steps that a landlord can take in order to feel more comfortable about the possibility of rent arrears and to mitigate the risk. The worst-case scenario is having to go to court to claim late payments or file an eviction – this is a time-consuming and expensive process.
There are two ways that a landlord can generally tackle rent arrears if a tenant falls behind. The first is to file for eviction and replace the tenant as quickly as possible. The second is to attempt to get all the owed rent from the tenant via the courts.
Evicting a tenant can be done via a section 8 eviction notice. It generally will require the tenant to be more than two months delinquent on rent and there is a detailed process in place that you will need to follow in order for the eviction to be successful. When you apply for the court repossession of the property to remove the tenant in rent arrears you can also get a court order for the tenant to pay all overdue rent amounts. You will then need to follow this up with the N1 Claim Form, and reference the judge’s ruling.
If this is the route you’re considering it’s important to know exactly what the process is as well as both your tenant’s rights and your own. However, it’s pretty obvious that it’s a much better idea and scenario for all parties involved to avoid this scenario.
There are many reasons a tenant might fall behind on their rent such as job loss, personal crises, or illness. There are various steps you can take before a tenant moves in to mitigate the risk of rent arrears.
As we’ve mentioned there are many reasons a tenant might not pay the rent in time. One of the main reasons is not being able to comfortably afford the rent amount. Due to the lack of affordable housing in certain areas tenants may be forced to pay a high portion of their salary to cover the rent which will make it difficult or even impossible to build up reserve funds and leave them at imminent risk of becoming homeless.
Running a tenant reference report on a prospective tenant will allow you to double-check they earn enough money (generally at least 3 times the rent amount) to pay the rent. You can also check their rental history, previous evictions on their record could indicate a pattern.
It is absolutely vital that both you and your tenants sign an up to date legally binding tenancy agreement. This is essential protection for both you and your tenants. In the tenancy agreement, you should stipulate the rent amount, due date, as well as the consequences for non-payment of rent.
Make sure the tenants understand their responsibilities as part of the tenancy and explain any parts of they seem uncertain or have any questions.
If you do sign an agreement with a tenant who may not have a high enough income or perhaps only have a short rental history – for example, they’re a student – then it’s a good idea to get a guarantor to sign the lease agreement as well. If the tenant does then fall into rent arrears during the tenancy you have a secondary recourse for collecting rent payments as the guarantor becomes responsible for covering the rent arrears.
When your tenant moves in get them to set up automatic payments from their bank into yours. This payment should be automatic on or before the patent due date. Once the payment is set up then unless they have insufficient funds there should never be a late payment and you can feel comfortably secure.
You can then simply use a system like Landlord Studio to review your bank transactions and reconcile the rent payment with our income tracking system.
If you’re dealing with a joint tenancy, ensure that all tenants understand they are equally responsible for the rent – and any unresolved debt. (If there’s an underpayment, often the tenant who has paid up can be a valuable and persuasive ally in getting the errant tenant to pay.)
Keep all tenants in the loop about the situation as they bear joint responsibility (even though they might think and tell you otherwise).
Whether you’re informing tenants of move-in details, responding to a maintenance request, or chasing up a late payment make sure you keep a written record of all the communications between you and your tenants. These records could be essential if you do need to pursue an eviction.
If you’re uncertain about a tenant’s ability to pay you might decide to take multiple months of rent upfront as a surety. There’s no legal limit on how many monthly or weekly advance payments a landlord can charge. Some landlords will ask for 6 months’ rent in advance or more. However, it’s important to note that it is illegal for landlords to disguise extra fees in rent in advance payments.
If a tenant has historically been prompt with payments but does fall into rent arrears for whatever reason, before filing a section 8 eviction notice and heading to the courts it’s a good idea to first of all talk with them. You want to understand why they have slipped into arrears and work together for a solution. Nobody wants to go through an eviction. The best outcome is to help establish a realistic repayment plan to help them catch up with the rent once again.
Dealing with tenants in rent arrears is unfortunately something that you will likely have to deal with during your time as a landlord. However, the risk of rent arrears can be greatly reduced by following proper precautions when selecting tenants.
If a tenant does miss a payment, an eviction should only ever be a last resort. Instead, landlords should work with tenants where possible to reduce the risks of rent arrears and mitigate the damage if it does happen. Payment plans are a good way to help tenants get back on track.
Have clear lines of communication and make sure that tenants know how to reach you should they be struggling with the rent. If a tenant can no longer afford the rent you can even offer them the opportunity to break the lease so that you can get paying tenants in to replace them quickly and they don’t end up with an eviction on record.
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