If you’re a landlord, it’s almost inevitable
that at some point you will face the inconvenience
of rent arrears or the unpleasantness of evicting
a bad tenant. If
you have been a landlord for any number of years,
or have multiple properties, then those chances
are multiplied.
So,
from day one as a landlord, make sure that you are
ready and have plans in place and the information
to hand to deal with arrears. In the worst case
scenario, rent arrears can cause bankruptcy. So
treating them soberly as a business risk like any
other is vital.
Prevention
is better than cure so avoiding rent arrears in
the first place is the best approach, even if that’s
easier said than done. In the first instance, referencing
and screening your tenants properly before the tenancy
commences is important. It’s not a scientific
process, it’s just a way of making your best
guess that the tenants are in a financial position
keep up rent payments.
One
of the problems with referencing is that it looks
at past performance and isn’t a prediction
of future performance. Especially in these particularly
tough economic times, even the most reliable tenants
with a bona fide track record might face difficulties.
That could be a change in personal circumstances,
losing their job or something else unexpected. Keeping
abreast of these changes in your tenant’s
life is why it makes sense to keep the channels
of communication open. Check in with your tenants
regularly. If there is a risk of rent arrears, knowing
about them as early as possible will help you plan.
If
rent arrears do occur, work with your tenant to
clear them as quickly as possible. The worst thing
you can do in the first instance is reach for the
court order forms and resort to using the law. If
eviction becomes the only option, the judge may
want to see that some attempt was made to reduce
arrears before finally making a ruling. It’s
slow, expensive and very time-consuming. Turn the
problem around. What can you do to help your tenants
pay? Taking part payments, constructing a payment
plan and keeping your head are all good ideas.
If
your tenants can’t cope and the situation
continues to worsen, then you’ll probably
have no choice but to terminate the tenancy and
file Section 8 and or Section 21 notices for possession
but with the recent court closures it can now take
the courts months rather than weeks to help landlords
resolve issues. This is when being prepared is vital.
Do you have the funds in place to plug the gap in
your finances left by the rent arrears? If you’re
paying a buy-to-let mortgage, how many months could
you afford to service the mortgage debt without
rent coming in? The courts move slowly, but banks
don’t waste time and there are plenty of tales
of landlords having properties repossessed before
arrears have been cleared. Making sure you have
a cash cushion available in the event of arrears
will mean that your business and income isn’t
at risk if the worst happens.
Research
from the Money Advice Trust shows the number of
people calling about rent arrears has risen by 84%
in recent years. A spokesman for the Money Advice
Trust, said: “Many first time buyers cannot
get a mortgage so demand for rented property have
risen. But with landlords pushing up rents this
has left some people struggling to meet bills, particularly
as this has coincided with a rise in inflation,
particularly of food and fuel costs.”
Rents
are continuing to rise, and for many tenants, the
rent is the first thing not to be paid.
Tenant eviction specialists say landlords should
never be tempted to deal with tenants who fall behind
on payments themselves as it could land them in
serious trouble. There are lots of steps that can
be taken before tenant evictions are necessary.
Always get a professional in and let them deal with
everything on your behalf, to the letter of the
law. It may be the case that a professional debt
collection service could nip issues with bad tenants
in the bud and then an eviction is not necessary.
If
an eviction is necessary, however, it’s vital
that all paperwork is in order; you’d be surprised
at the number of cases that are thrown out because
the correct procedures have not been followed.
