Dealing with tenants who are not paying the rent
Sadly, as the economic crisis continues, wages stagnant and living costs increase, budgets are stretched and bill payments are missed or delayed. Most official advice to tenants is to make the rent payments a priority expense and pay these first. However a growing number of tenants are not adhering this advice as they believe private landlords especially are in a weaker position to demand money than companies who can cut off the services following non payment, TV, phones, etc.
Obviously there are a large number of tenants who are genuinely in financial difficulty who have through no fault of their own been unable to pay the rent. A typical example of this is a tenant how has been made redundant. Our best initial suggestion would be to gather as much information about the situation as possible to try and gain an insight in to the reasons behind the non-payment.
- Why wasn’t the rent paid? When do they expect to make a payment?
- Are they able to make a partial payment now? (Any payment should be received as a positive signal that the tenant is trying to resolve the issue, refusal to make any sort of payment should be looked at with suspicion)
- Is the financial situation temporary? (how soon can they resume payments?)
- Have they lost their job or changed jobs? (a new job may require them to work a certain amount of time before receiving their first pay cheque)
- How long have they been struggling with debt (it could be their income does not cover their outgoings, and that there is no realistic way to cover the monthly rent)
When dealing with rent arrears you need to act quickly, both to stop the debt spiralling out of control, where it can never be repaid, and also to make sure that the tenant knows you will not let debts mount up.
The tenant needs to be made aware that if they want to avoid court action, then they need to resolve the situation with either a full or partial payment. Some tenants use the ‘next week’ line, and promise to pay, but never quite manage to! So if you have already had a series of excuses, then unfortunately you need to accept that it’s unlikely any of these are going to materialise and the best advice is to plug your losses, and the sooner this process is started the sooner you can get new paying tenants in your property. Even if you don’t have a formal tenancy agreement in place, you can still evict tenants even without a contract.
What can you do if your tenant isn’t paying the rent?
Often landlords have mortgages on their properties and have to meet these financial obligations. If there is no rental payment going into the bank, then these payments may not be able to be paid unless the landlord uses another form of income to cover them.
If payments are made, it is likely to be through using savings, or by making drastic cut backs to your own expenditure, which is an inconvenience at best and in many cases causes acute financial difficulty to the landlord. If you are a landlord in this position, it is advisable that you speak to your mortgage lender to arrange a payment holiday. However bear in mind that many mortgage lenders only allow these every few years, so if you have already had a payment holiday recently you may not be able to apply for another one, so please do not rely on this as a long term solution, instead ask us to arrange a rent guarantee which is much more effective solution to ensure your rental income remains steady.
It is also worth bearing in mind that a mortgage payment holiday *may* result in loss of some benefits on your mortgage account and you should discuss these with your lender and/or mortgage adviser. Some landlords have unwittingly lost a loyalty discount which equates to a lower interest rate. Also remember the payments missed are added to the end of your mortgage (with interest) so you will payback more than the value of the payments missed during the payment holiday period.
How to recoup arrears built up by late or missed rental payments
It is not at all uncommon for tenants to miss rental payment(s), then resuming paying them without settling the amount owed, these are the ‘rent arrears.’ As a landlord you are not obliged to accept this new status quo, and it is quite reasonable to expect the rent arrears to be repaid as soon as possible.
However if the tenant is now paying the rent on time (the full amount) you may be able to negotiate a repayment plan. This should be agreed in writing and it is usually expected that a tenant will outline the repayment plan suggestion – although you are under no obligation to accept this.
- It is often encouraging if your tenant offers to make smaller, regular, but consistent payments. These should be recorded in case they either stop being made, or there is ever any confusion over how much has been repaid.
- Failure to make any sort of payments towards the rent debt generally shows that perhaps the tenant is not serious about paying, and is just trying to stay in the property for as long as possible “rent free” before they are evicted.
If your tenant is in real financial hardship
In some cases the non payment of rent is due to serious financial hardship. If you suspect this then it may be a good idea to advise your tenant to get in touch with the relevant social departments to get advise on housing and benefit payments. Unfortunately it seems working people are entitled to less in times of hardship than people living on benefits.
It is increasingly the case that tenants don’t pay their private rent, to get evicted and then become housed in social housing. Speak to us if you feel that is the case.
How do you minimise your financial losses?
It is unlikely that the whole amount will be recouped, although you can minimise your losses by acting quickly, often by re-possessing the property from the non paying tenants. Evicting Tenants Ltd can act quickly and can save landlords up to 8 weeks’ worth of lost rent. We offer a free case review which will enable you to get a clear picture of what is the most likely outcome to your tenant situation.
Rent arrears – prevention is better than cure
Prevention is the cure when it comes to tenant not paying the rent. The best thing that you can do is minimise your chances of this happening to you with a full tenant reference and credit check, before they move in, and if possible request a guarantor to also sign the tenancy agreement.
Having a full tenant reference also means that you will be eligible for a rent guarantee. This is a essential insurance which will last either 6 or 12 months and basically means that if the rent is not paid then you can put a claim in to the insurer who will then pay you the rental amount. It is a great way to protect yourself from this situation again.
Contact us for more on this!
Call us: 0208 088 9015
Email us: email@example.com