Actions landlords should take when their tenant falls into rent arrears
Are you familiar with the appropriate steps to take when a tenant falls behind on rent payments? This can pose a challenge for landlords, as it is crucial to ensure compliance with relevant legislation throughout the process. Additionally, many landlords lack a systematic approach for addressing such situations, which can leave them feeling unprepared. Today, we will outline some essential guidelines for pursuing rent arrears, including dos and don’ts. We will also delve into the recommended process for handling these complex scenarios, including the selection of appropriate legal notices to serve.
A tale of two tenants
CR Real Estate has identified two distinct types of tenants who experience rent arrears. The first group consists of tenants who, due to unfortunate circumstances, find themselves unable to pay at present despite their willingness to do so. The second group comprises tenants who have the financial capability to pay but deliberately choose not to fulfill their rent obligations. Dealing with tenants in the latter category can be particularly challenging. Therefore, it is crucial to establish a well-defined process that guides your actions, ensuring you are prepared to handle either situation effectively.
Guidelines for pursuing rent arrears: what to do and what to avoid
As you develop your process, we will provide our recommendations on the dos and don’ts in handling such situations. Effective communication is paramount. Once you become aware of missing payments, promptly reach out to the tenant to understand if there is an underlying issue causing the problem.
Through these communications, you can determine which category the tenant falls into and work towards finding a mutually satisfactory solution. The initial step, when a tenant fails to pay rent for seven days, is to send a formal letter requesting payment. Follow-up letters should be sent every seven days throughout the process. Simultaneously, attempt to contact them via phone or email to seek an explanation and negotiate a payment plan.
It is crucial not to harass the tenant. Continuous, excessive contact throughout the day is legally defined as harassment and should be avoided. Instead, establish scheduled times for communication.
If the tenant is genuinely unable to pay, it may be worthwhile to apply for direct payment from Universal Credit. The advantage of this step is that there is no harm in making the application, regardless of whether the tenant eventually receives payments from Universal Credit. It can potentially relieve the tenant from the responsibility of making rent payments themselves.
What to do when they just won’t pay
Responding promptly is crucial when dealing with tenants who are capable of paying rent but refuse to do so. In such cases, we recommend taking swift action to regain possession of your property. It is important to send rent demand letters promptly every 7 days, and on the 28th day, serve a notice of possession as soon as possible. Once legally permissible, initiate court proceedings without delay.
Now, you may be wondering about the appropriate notice to serve tenants in arrears. Our recommendation is to serve a Section 8 notice, specifying the grounds you wish to rely upon (typically grounds 8, 10, and 11). This notice is appropriate when the tenant is two or more months behind on rent. We suggest this notice because it comes with a 14-day notice period in England, allowing for the quickest path to regain possession of your property in such cases.
You may have heard of serving a Section 21 notice to tenants in arrears, which is also a valid option. However, it is worth noting that the notice period for Section 21 is 2 months long, resulting in a delay in effectively addressing the situation.
Final Thoughts
Ultimately, effective communication plays a vital role in responding to tenants who have fallen into rent arrears. For tenants experiencing financial difficulties, engaging in dialogue can help understand their challenges and work towards a mutually agreeable payment plan. However, when tenants willingly refuse to pay, they are often unresponsive, necessitating legal action. Familiarising yourself with relevant legislation is crucial, and a valuable resource we recommend is GOV.UK, which provides up-to-date guidance and information on the legal notices discussed today.
We hope this has provided you with valuable insights on how to handle tenants in arrears. At CR Real Estate, we are committed to assisting landlords in effectively managing their rental properties. We have developed a wealth of content offering practical, step-by-step guidance on the pertinent legislation that landlords need to navigate. Contact our expert lettings team today to discuss your property and how we can help you.
This article is intended as a guide only and does not constitute legal advice. For more information, visit gov.uk.
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