The Ultimate Guide to Rent Arrears

Not sure what to do when your tenant falls into arrears? We’ve got the very best advice from Paul Shamplina to help you navigate this tricky situation.

Landlord Action‘s Paul Shamplina has over 25 years experience in the legal field helping landlords with problem tenants, including issues around rent arrears.

Right now, more tenants are in arrears than during the Covid pandemic, according to 66% of respondents to a recent survey of housing associations, which looked at the pressures facing the sector.

As tenants are at the sharp end of the cost-of-living crisis, landlords face more issues with rent arrears, as the overall market turmoil isn’t calming down. But, forewarned is forearmed, so let’s look at how you can protect yourself.

How can a landlord recognise the issues before they become unmanageable?

As Paul points out, tenant referencing should always be your first port of call. If you want to protect yourself with Rent Guarantee Insurance, referencing is a must – but it should be something you do regardless.

We know now that rents are going through the roof, as Paul points out, tenants are paying the best part of 40% of their wages towards rent, so there is an affordability issue for many tenants. So Paul recommends that you are much more stringent when you reference. There is also a larger pool of tenants to draw on these days as demand continues to outstrip supply, so you can afford to be choosy.

Some landlords are unlucky enough to face arrears in the second month of the tenancy – this is why we recommend that you are so thorough in your referencing process, so that you can hopefully avoid this.

As Paul states, most tenants are are truthful, they are willing to have a conversation. However, there are tenants that bury their head in the sand and they won’t want to take your call. What is important here is a bit of mediation.

What are the steps a landlord should take when a tenant falls into arrears

Firstly, you need to open up a dialogue with the tenant. While they may try to avoid you, it’s important to open up the lines of communication so you can work out a solution, such as a repayment plan.

Paul recommends that you do give your tenant that chance to rectify the situation. As he points out:

Over the past few years, there aren’t many of us who haven’t experienced changes in our circumstances. If the pandemic has taught us anything, it’s that life can change drastically in the blink of an eye

However, this is your business, so you have to balance that sense of empathy with a buisness-like view.

If you have a tenant that’s been in your propert for 2-3 years, you know them, they’ve previously been reliable, it’s worth remembering that a good tenant doesn’t turn into a bad tenant overnight. So then it is worth taking the time to understand their circumstances, if they’re genuine and transparent and then work with them to resolve things.

Unfortunately, it’s not always possible to resolve the issue through communication alone and there are limits as to what can be tolerated, especially when you have mortgage repayments to make.

If it reaches two months of rent arrears with no communication with the tenant to make a plan to resolve things, this is when you really need to take action.

When should a landlord consider eviction?

When it comes to a month and a day, that’s technically two months rent arrears and, under the current grounds under Section 8 , two months rent arrears is a mandatory ground for eviction. So you can serve a Section 8 notice at this point.

The Section 8 notice is a 14-day notice, so the tenant has 14 days to pay the outstanding rent, leave or come to some sort of arrangement with you, the landlord. This shows that you’re you’re starting the legal process.

Undoubtedly, the eviction process is a challenging ordeal for both parties involved and while the backlogs from the pandemic are improving, courts in places like London still have a waiting time, and even if you have already served a Section 8 notice and regained possession of your property, there might still be a considerable time delay and the immediate recovery of unpaid rent cannot be guaranteed.

What can a landlord do to protect themselves in advance?

Rent Guarantee Insurance proved its worth during the pandemic, but with more tenants in arrears now than during Covid, it’s something you really need to invest in. While it won’t prevent you having to deal with the situation with your tenant, you are at least assured that you have the financial side of things covered.

Top Tips from Paul Shamplina

  1. Remain vigilant for warning signs
  2. Earnestly opt for mediation as soon as possible and seek mutual agreement
  3. If mediation fails, consider serving a Section 8 notice as this often paves the way for resolution
  4. Ultimately, as a last resort, look to court proceedings to repossess your property
  5. Ensure you have RGI and legal cover

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