It is every landlord’s nightmare: a previously reliable tenant fails to pay their rent on time. This can leave landlords struggling to meet their mortgage repayments, and causes a huge amount of stress. Most landlords will have to deal with arrears at some stage, with around 9% of rent unpaid or late.
Rising rents are good news for landlords who want to grow their business, but combined with relatively high unemployment and growth in inflation outstripping growth in wages, they can mean that tenants struggle to meet payments. The percentage of late or unpaid rent fell slightly in August, but had been steadily growing for several months before that.
As always, prevention is better than cure when it comes to rent arrears. Carrying out full credit and referencing checks on tenants can help eliminate those with a history of non-payment of rent or other credit difficulties. However, it can’t predict whether conscientious and financially stable tenants will suddenly experience financial problems due to illness or redundancy.
Landlords should encourage an open and honest relationship with their tenants, so that if the worst does happen, they will be able to work with them to deal with the problem before it escalates. Many tenants who lose their jobs will be able to access housing benefit to help them pay rent, and landlords should encourage them to do this. Tenants should also be encouraged to contact landlords before a rent payment is due if they think they are going to struggle to pay. Rather than missing the whole payment, they may be able to negotiate a part payment that will allow the landlord to pay their mortgage, with full payments being met once the tenant is solvent again. Sometimes, landlords may be able to negotiate a payment holiday with their mortgage company to allow tenants to clear the arrears.
While landlords should always do everything they can to help tenants before moving to legal threats and eviction, it will sometimes be necessary. Eviction does take time, however, and landlords need to be able to meet their mortgage payments in the meantime. Some landlord insurance includes arrears protection, which can give landlords some breathing space while they deal with the legal processes. Landlords should issues tenants notice of possession under Section 8 of the housing act. They are allowed two weeks to respond, after which a court will hear the case if the tenant has not either paid or moved out.
Arrears are stressful for everyone involved, and many tenants who find themselves unable to pay rent would rather work with their landlord to clear the arrears than against them. Where they can’t or won’t do so, landlords should move to use the legal system to protect themselves against financial difficulties of their own.