What can you do if your tenant doesn’t pay their rent?
the private rental sector is recording further increases in rent arrears. If your tenant isn’t paying their rent in full or on time, or at all, you have a legal right to take action but must remain aware of the changing legislation about what you can and cannot do.
Prevention tactics
Let’s go back a step before we discuss how to address arrears. At Capital Estate Agents, we prefer prevention to cure. The earliest stage of attempting to prevent arrears is when we receive a request to rent a property and we conduct thorough vetting of the applicants on behalf of our landlords. Tenant referencing is carried out by an independent agency who are experts in this area and have access to check financial records and employment status.
If arrears do become a problem, tenants may be able to make some payments so it’s worth asking early if they can agree to a repayment plan making smaller payments over a longer time. This could offer a better solution than receiving no payments.
Timely reaction
If your tenant isn’t paying their rent at any stage, and you are a landlord who have appointed Capital Estate Agents to manage your property, we will be aware of the arrears just as soon as they occur. Our software will prompt us to the late payment and initiate an automatic sequence of escalating actions from an initial soft letter through to a Section 21 notice, if permissible. If you are a landlord managing a residential property without the help of an agent, you will need to keep a diary note to check the rent has been paid on time each month. If it isn’t, diarise a series of actions to follow to continue checking whether payment has been received, and if not, escalate the actions you take.
Communication
Initially we can handle late payment by polite but direct communication identifying that there is a late payment, the amount, when it was due and requesting that it be paid immediately or asking for the tenant(s) to contact the office. Often, this is sufficient to prompt payment. For clients in financial trouble it can initiate a conversation that needs to happen before the problem escalates.
Landlords or their agents need to provide rent statements at a minimum of every 3 months (13 weeks if payment is weekly) to their tenants so they are absolutely clear on their current debt.
If the tenant is in receipt of benefits, there may be recourse to speak to the council and request payments be made direct to the landlord or reductions to pay arrears. This must be explored in close consultation with the council.
If a tenant had a guarantor agreed before signing a tenancy agreement, an agent such as Capital would engage them in conversation about helping to pay off arrears.
Escalating action
There are lots of complex facets to handling arrears hence it is best to have a reputable agent such as Capital Estate Agents managing it for you. In order to take any action, landlords, just as agents acting on behalf of landlords, must keep clear and complete records of every contact with the tenant in regard to rent arrears in case it ultimately ends in court action. As agents using the highest quality technology, Capital Estate Agents have a software trail for every action taken automatically. We also log any phone calls made or meetings held in the office.
When rent continues not to be paid, a landlord can seek possession of their property. This must be done by issuing the correct notices, at the correct times.
A landlord can evict tenants who have an assured shorthold tenancy (AST) using a Section 21 or Section 8 notice, or both. Capital Estate Agents would advise and help our landlords through the process.
· a Section 8 notice applies if your tenants have broken the terms of the tenancy e.g. by not paying the rent. It applies when the tenancy has not come to an end.
· a Section 21 notice can be used to evict your tenants after an AST fixed term tenancy ends.
Notice periods for eviction action are currently back at 2 months. At the peak of the pandemic, the Coronavirus Act 2020 required landlords, in most cases, to give extended notice of 6 months of their intention to seek possession before starting court action. This was to protect those whose ability to pay their rent had been affected by the pandemic and prevent a surge in homelessness. A longer eviction period could return with the fluctuating Covid rates so keep an eye on the legislation so you’re not caught out.
Section 8 Breach of Tenancy Agreement Notice
After 2 months arrears, a landlord can issue a Section 8 Breach of Tenancy Agreement notice. At Capital we would be able to advise a landlord on when they can take this action and ensure it is legitimate to do so. This is the first step towards evicting a tenant. Rent arrears in this case may be considered the ‘grounds for possession’ that you need. The landlord would need to appoint a solicitor at this stage, so costs start to mount. Your agent needs to know the law and understand what the legal process is. An effective agent such as Capital Estate Agents will continue to communicate with the tenants and try to find ways to resolve the arrears without court action to save everyone time, stress and money while this process is underway.
Section 21 ‘Notice to quit’
Under Section 21 of the Housing Act 1988, a landlord has the right to repossess the property at the end of an Assured Shorthold Tenancy. The Section 21 notice, when issued, is really a request to leave that is made under legal conditions. When that is not complied with, legal action can follow. Recovery of rent arrears are not strictly covered by this process, this simply puts an end to any further non-payment by evicting the tenant. Landlords can, at any time within six years, make a separate claim for debt. The process needs careful consideration, and we recommend taking advice from an experienced agent as well as legal advice.
Rent Guarantee - protection
At Capital we encourage our tenants to take out Rent Guarantee insurance. This is the simplest method of ensuring arrears will not be an issue as it covers the non-payment of rent up until eviction plus the eviction costs themselves. It has a nil excess and £100,000 limit of indemnity. Capital Estate Agents offer all tenants Rent Guarantee Insurance through Goodlord when they sign their shorthold tenancy agreement. This policy can prevent all the worry and heartache associated with the above.
Further guidance
The government has worked with the National Residential Landlords Association to produce a guide to managing arrears and avoiding possession claims which is very useful for reference. The free guide includes golden rules for dealing with rent disputes and a downloadable ‘Pre-Action Plan for Managing Arrears and avoiding Possession Claims’. The government website provides up to date advice on Section 8 and Section 21 notices.
For more information about how to best manage your rental property and advice on handling arrears, speak to our experienced lettings team at Capital Estate Agents on 0208 313 0010 or email info@capitalestateagents.com