Managing Rent Arrears – 5 top tips!
Managing rent arrears can be both stressful and time consuming. The RLA’s Landlord Finance, Investment and Tax Report 2016 found that 28% of landlords have experienced rent arrears in the past 12 months.
Once a tenant falls into arrears it immediately impacts on a business. Landlords have mortgage payments to make, insurance premiums to pay and maintenance costs to cover all of which are heavily reliant on the income from rent.
With this in mind, here’s our five top tips when it comes to managing Rent Arrears:
1) Prevention is better than cure!
A robust tenant referencing system is the first step to preventing arrears. By doing your homework prior to making a decision on whether to let to a prospective tenant, it increases your chances of finding a tenant who will pay their rent on time and the credit history to give you the confidence that they are reliable.
2) Act fast
It is much quicker and easier to nip arrears in the bud before they get out of hand. Therefore, we recommend that you should contact the tenant as soon as a payment is missed. Initially, keep this friendly and informal, but by acting swiftly, you will show the tenant that you are on top of the situation. Often the tenant will pay up soon after this.
3) Pre-action protocols
There are various procedures you should follow in order to avoid going to court; which will save time and money. You should aim to give your tenant every chance to rectify the situation, which would be preferable for all concerned. You can arrange a payment plan with the tenant, request that housing benefit (if applicable) is paid directly to you, contact the guarantor if there is one in place. But regular and official contact is key, letters stating how much they owe and warning court action is often enough to ensure the arrears will be settled without the need for legal action.
If the situation does not improve, gaining possession of your property is the next port of call to avoid the debt growing. Our recommendation is to use a section 21 on accelerated possession to enable you to get new tenants in more quickly. However, this option is only available if the fixed term has ended. Alternatively, if the tenancy is still in the fixed term and the rent arrears are greater than two months, you may choose to use a section 8.
5) Legal action
If you have sought possession on a section 8 there is the option to claim arrears at the hearing. However, if not, you will need to use the County Court Small Claims route. You are advised to use the online process, Money Claim Online. It is important to identify whether it will be worth your while, as it is a costly and time consuming process and there is no guarantee that you will get your money.