My tenant has just missed their first payment, can I help them get back on track?

As the cost of living bites, your tenant could find themselves struggling to make bills and rent, so how can you support them if they’ve missed a payment?

As the weather warms up (slowly, but surely), heating your home might not be high on the agenda, but with another energy bill increase expected in October – just in time for winter! – the worry is not far from many minds. Tenants currently already spend on average 42% of their income on rent and this figure is climbing as rents rise, so the struggle to make ends meet is only going to increase.

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Rent Guarantee Insurance

Towards the end of 2021, ICM Research found that:

  • Nearly one in ten private tenants in the UK were struggling to find their rent on time every month. This means up to 350,000 people were struggling to cover this basic expense 
  • Average amount of arrears increased from £730 to £907. This was an increase of 24% between November 2020 and April 2021

Now, while a lot of this was due to the pandemic and furlough schemes coming to an end, with today’s rising costs, it’s reasonable to consider the possibility that your tenant may struggle to make ends meet before the year is out.

However, if your tenant misses a payment, this doesn’t necessarily mean you need to jump straight to eviction. If they have previously been a good tenant, taking good care of the property and paying on time, you should consider if this is a one-off blip that can be rectified, rather than go through the stress and upheaval of eviction and finding a new tenant.

How can landlords protect against rent arrears?

Prevention is always better than cure and while you can’t prevent your tenant facing financial difficulties, you can protect your investment against any missed payments.

Rent Guarantee Insurance covers unpaid rent, so you can focus on next steps rather than how you will cover your expenses. Mashroom’s RGI pays out at the first missed payment, so you don’t have to worry at all. While £299pa may feel like a large initial outlay, this is significantly less than you could lose in missed rent payments.

My tenant has just missed their first payment how can I help

If your tenant has always been reliable with payments, you may feel like you don’t need this, but no one can predict the future, so it’s best to be prepared. Rent Guarantee Insurance requires tenant referencing before you can take it out – it won’t cover a tenant with a history of non-payment, but it will cover a great tenant, in the event they fall into difficulties.

Unfortunately, Rent Guarantee Insurance is not something you can take out after the payment has been missed – so please be sure you are covered and prepared well before you might need it!

How can you support your tenant if they’ve missed a payment?

Hopefully you have RGI, so you know your expenses are covered and you don’t need to worry too much about that, so you can focus on next steps with your tenant.

  • Have a conversation. As soon as you notice the payment has been missed, speak to your tenant. It may be that they will come to you, but they may be too embarrassed to and you will need to approach them
  • Keep it professional. If your tenant hasn’t told you about the missed payment and left you to discover it, they may be worried about what you will say and do. Leave a message encouraging them to call you as soon as possible to figure out a way through this. Keep it professional and friendly so that your tenant is reassured and will call back
  • Find out what is going on. Your tenant is under no obligation to tell you why they missed the payment, but hopefully they will. Once you know what is wrong, you are more likely to be able to make a plan that works for everyone. For example, if your tenant has lost their job, you know their focus will be on finding a new one and reliable payments will resume as soon as possible. However, if your tenant is simply unable to manage the increased bills as well as the rent, this is unlikely to change, so a different plan needs to be made
  • Make a plan. Speak with your tenant about what you can do to get back on track. If they can no longer afford the payments, it may be worth discussing moving on – you could offer them a much shorter notice period than they currently have to give, so they can move as soon as they find a new place. If they are between jobs and want to stay, see if you can come to an arrangement about a repayment plan
  • Get it in writing. Whatever you have discussed and agreed on in conversation, follow up with an email so that both parties have it in writing. It’s important to note that this is not legally binding, but it will give you both something to refer back to and if you do need to evict, it’s good to have proof that you tried all other avenues first

What if my tenant refuses to work with me?

Unfortunately, it may be the case that your tenant refuses to work with you to get past this bump in the road. They may refuse your calls and entry to the property, while continuing not to pay.

This behaviour will leave you no choice but to evict. If you have Rent Guarantee Insurance, see what legal cover it offers you. Mashroom’s RGI provides up to £25,000 in legal advice and eviction costs, so your first step should be to activate that.

When it comes to eviction, make sure you are doing everything by the book, so get all the legal advice you can throughout the process.

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