Tenants are in arrears when they fall behind with paying their rent to a letting agent or landlord. Dealing with tenants in rent arrears is a task most landlords face from time to time.
Conflict rarely solves the problem, and under COVID rules, the courts expect landlords and tenants to negotiate a payment plan before applying for eviction orders.
Here are some tips for landlords dealing with rent arrears.
Work to a plan
If the arrears are a financial one off blip, then you would want to try to sort the matter out with the tenant.
If not, you may want the tenant to leave and may have to take the matter to court to accomplish this.
Act as soon as the tenant falls into arrears to stop the amount they owe ballooning into a sum they can never repay.
Draft a statement of account that clearly shows the rent due; the rent paid, and the amount owed.
Check your files to make sure you followed the rules when starting the tenancy by giving the renter:
- An energy performance certificate
- Gas and electrical safety certificates
- Confirmation you protected any deposit
- A copy of the Government’s How to Rent guide
You will need this paperwork if the matter goes to court. In England, without these documents (except the electrical report) you may not serve a Section 21 no-fault eviction notice.
Find out why the tenant is in rent arrears
The first issue to look at is why is the tenant in arrears.
The cause could be an unexpected one-off expense like expensive car repairs or a sudden change in financial status, like losing their job.
Don’t overlook personal problems like drinking, drugs or gambling.
It would help if you had a conversation with the tenant to pinpoint the cause of the arrears to stop the amount they owe from increasing.
Not all tenants will want to discuss their issues, so don’t be surprised if they rebuff your attempts.
If the problem is a one-off, work with the tenant to clear the backlog. If the problem is ongoing, keep a record of the times and dates of the conversations you have and a brief note of the outcome. These might be useful later in court if you have to show you have tried to negotiate a solution to the arrears problem.
Lastly, keep your cool when you meet the tenant. These conversations can get emotional with lots of anger and tears. However, don’t forget you are working to a plan whatever the outcome, so an angry response to a tenant’s outburst only clouds the issue.
Negotiate a repayment plan
The government is keen no one is made homeless during the pandemic. Landlords should try to agree on a repayment plan with tenants in arrears.
Put the plan in writing and make the terms clear:
- When does the agreement start?
- How much should the tenant pay?
- How often should they make payments?
- When should the agreement end?
- What happens if the payments are late or missed?
Identify the parties to the agreement and make sure each party signs and dates the document while keeping a copy.
This agreement could be useful document later. If the tenant breaks the agreement, you can present it as evidence in court that you tried to negotiate a settlement. In addition, the judge may ask the tenant why they did not keep to the terms.
If the tenant cannot agree to a reasonable repayment plan, make a note of this to show you made attempts.
Make sure the repayments are affordable by taking the tenant through the Citizens Advice online budget tool
Use the rent-to-income ratio, which compares the rent a tenant pays with their monthly income.
A reasonable ratio is income should exceed rent by at least 30%.
Lastly, you could consider writing off the arrears to encourage the tenant to move on without taking court action. This way, you can offset the debt against rental profits if you can show you have taken reasonable steps to recover the money.
Check if the tenant qualifies for financial help
Some tenants can claim benefits to top-up their income. These may include back-dated sums, which the tenant could put towards paying off arrears.
Ask your tenant to check if they can claim housing benefits or Universal Credit.
The local council may make a discretionary housing payment, also called a DHP, to help a tenant on benefits clear their arrears.
Tenants in Wales can apply for a hardship grant to repay rent arrears that have built up between March 1, 2020, and June 30, 2021, due to COVID-19.
Evicting a tenant in rent arrears
You can manage the proceedings or instruct a lawyer to act for you.
Two routes are open to taking possession of a rented home on an assured shorthold tenancy –
- Serving a Section 8 notice because the renter has broken the terms of their tenancy agreement. There are specific grounds available for failing to pay rent on time.
- Serving a Section 21 notice. Most landlords and lawyers agree the Section 21 notice is the easiest option as landlords do not have to prove breach of contract as part of the proceedings.
Don’t expect the council to offer housing help
In most cases, the local council will not offer to rehouse a tenant at risk of losing their private rented home.
Landlords have to go through the eviction process to get the court to set a date for the repossession before the council will generally act.
If the tenant moves out before the repossession date, the council may argue they are intentionally homeless and may decline to help them with social housing.
Expect the eviction procedure to go down to the wire, which means you must pay several hundred pounds in court fees to get the property back.