Rent arrears refers to missed rental payments.
Dealing with rent arrears is an important part of property management. However, as a landlord, it can be hard to know what your legal rights are, and how best to deal with the situation.
To make matters more complicated, the new Renters’ Rights Bill is set to make some big changes to the rental space, making it harder for landlords to evict tenants.
To help you navigate this tricky situation, we explain our strategies for dealing with rent arrears, including staying compliant and trying to resolve the issue as quickly as possible.
What Are Rent Arrears?
Rent arrears is a when a tenant doesn’t pay rent by the agreed-upon due date, making their payments overdue.
This situation can happen for a variety of reasons, including employment loss or unforeseen financial and personal circumstances. Understanding the root cause is important in order for you to decide the best course of action as a landlord.
It can seem tempting in these situations to jump to the worst case scenario, but the truth is many rent arrears issues are resolvable as long as you act quickly.
After How Long Can You Evict A Tenant Due To Missed Payments?
Under current regulations, landlords can start the eviction process if a tenant builds up a certain level of rent arrears. Traditionally, if a tenant is in arrears for two months, landlords could serve a Section 8 notice citing rent arrears as the ground for eviction.
However, the Renters’ Rights Bill is set to improve tenant rights in the UK, this means:
- Extended arrears period: The period of rent arrears before serving a notice for possession is expected to increase from two to three months.
- Increased notice period: The notice period for eviction due to rent arrears is set to extend from two weeks to four weeks.
These changes mean landlords must wait until a tenant has up to four months of unpaid rent before starting the eviction process.
Rent Arrears
Common Questions Landlords Might Have About Rent Arrears
Can I Charge Interest on Late Rent Payments?
Yes, but only if they agree to it in your tenancy agreement. Make sure that any interest charged does not go over legal limits and is clearly laid-out (and agreed to) in the initial tenancy contract.
How Should I Keep Track Of Rent Arrears?
Keep a detailed records of all rent payments, missed payments and communications with the tenant. This documentation is important if you need to take legal action.
Try and have a folder on your computer for each of your tenants where you store this information. If you speak to them over the phone, make sure you follow up over email so everything you discussed is in writing.
What If the Tenant Offers Partial Payment?
Accepting partial payments can be a good solution and may show that the tenant is willing to resolve the problem. However, it’s important to be clear about how these payments will work towards the full balance, and make sure that accepting them doesn’t impact your right to eviction if needed.
What to Do If Your Tenant Misses Rent Payments
Speak to them quickly
Reach out immediately when you notice a missed payment to understand the situation. Document all conversations so you have them to hand if needed.
Assess the situation
Work out if the tenant is just having temporary financial difficulties. If so, this might just be a bump in the road and it’s very possible that you can come to an agreement.
See if the the tenant is willing to pay the balance and resolve the arrears. If so, try and come up with a payment plan together.
Negotiate a repayment plan
Agree on a realistic repayment plan that allows the tenant to pay off arrears over time. The best way to resolve the issue is by working with your tenant, so try to collaborate with them in a calm way.
If you manage to come to an agreement, formalise the plan in writing, signed by both parties. That way if they continue to miss payments, you have grounds for legal proceedings.
Engage the guarantor (if you have one)
Inform any listed guarantor of the arrears and request payment if the tenant does not stick with the repayment plan. Having a guarantor signed on during the tenancy screening process can be a great way to resolve these situations and provide an extra layer of security.
Explore financial assistance
Tenants receiving Universal Credit or Housing Benefit may qualify for Discretionary Housing Payments (DHPs) to cover housing costs.
In cases of significant arrears, landlords can apply for rent to be paid directly from the tenant’s benefits. However, this is a last resort.
Consider mediation services
Use third party mediators to come to a solution without taking any legal action.
Initiate legal proceedings as a last resort
If arrears keep building up over 2-4 months and all other efforts fail, serve the legal notice (e.g., Section 8) as specified by the current legislation.
Apply to the court for a possession order if the tenant does not leave the property after the notice period.
How To Prevent Rent Arrears
Working with a professional property management company can help reduce the risk of ending up in a rent arrears situation. However, if you plan to manage the property yourself, here are some of our top tips.
Tenant screening
When you first look for a tenant for your property, make sure you take the tenant screening stage seriously. Check the financial stability of prospective tenants, look at bank accounts, employment contracts and level of income relative to the rent. If you can, try and lock in a guarantor.
For an extra layer of protection, get references from previous landlords and employers to identify problematic tenants early on.
Clear tenancy agreements
Clearly outline rent amounts, due dates, and accepted payment methods. This way, it will be easier to document when your tenant is in breach of their contract. Make any penalties or interest for late payments clear in the contract. That way, tenants are unable to dispute any late charges you decide to enforce.
Regular communication
Foster a relationship with your tenant that encourages them to communicate any issues quickly. Having a collaborative mindset will make the entire process easier.
Stay informed about legislative changes
Keep informed around changes to housing laws so you know your rights and that of your tenants.
Work with a property management company
Professional property management companies exist to help prevent rent arrears. Property managers are experts in tenant sourcing, rent agreements and legislation so they can act quickly and efficiently when needed.
Rent Arrears: Everything You Need To Know
Being a landlord can be tough, especially if your tenants go into rent arrears. However, screening them properly from the start, making sure the agreement is clear and communicating regularly can help you resolve the issue quickly.
In these situations it’s always best to speak to a professional to make sure you’re staying compliant.
For professional advice around rent arrears, contact J Property Management’s London Property Management team at info@jpropertymanagement.co.uk
