Tenants in arrears are a big problem for landlords at the best of times. The cost-of-living crisis has intensified the issue for many landlords in Brighton, as tenants in the UK struggle to manage their finances and cannot keep up with rent payments.
Whether you’re a buy-to-let landlord, depending on the rent to pay your mortgage, or you’re renting out property to supplement your income, a tenant not paying rent can have serious implications for your finances.
If you’re worried that your tenant is not paying rent, and aren’t sure what to do, here is a simple guide to the process. Read this alongside the government’s latest information, available on the gov.uk website, and if you’re not sure, always seek legal advice.
The pandemic brought changes to the law around evictions, put in place to protect tenants from homelessness if they were struggling to pay rent. Whilst there have been many more changes since, it is currently the position that you need to give your tenant two months’ notice if you plan to evict them. However, the rules change frequently, so always check the gov.uk website for the latest guidance.
It’s good practice to ensure that you have processes and procedures in place so that if issues with your tenants arise, you have records and documentation available for evidence if you decide to start eviction proceedings. As well as keeping records of rent payments, send your tenants a dated receipt each month.
Keep the channels of communication with your tenants open at all times so you can pick up any problems at an early stage and talk openly about solutions.
If they are behind in their payments, don’t wait around, in the hope that they will eventually pay the rent, especially given the precarious nature of people’s jobs right now.
If they have previously been a good tenant, it’s worth being flexible. Suggest they explore other sources of help, such as exploring their eligibility for universal credit and housing benefits. You could also suggest they get professional debt advice – organisations like Stepchange may be able to help.
The tenant’s guarantor has an interest in ensuring that the tenant’s rent is being paid because, ultimately, they will be left with the bill if the tenant fails to pay. If your tenant has a guarantor, it is worth talking to them at this stage. Inform them of your concerns so they can make arrangements with the tenant to ensure the rent is paid and prevent further arrears from accruing.
If your tenant can’t afford to pay and is willing and able to leave the property, it could be in your best interest to accept the loss of rental income and allow them to breach their contract by moving out. This will enable you to find new tenants and receive monthly payments again.
If you can’t come to any informal agreement with your tenant or their guarantor, then you will need to follow a formal legal process to claim possession of your property.
The next step is to send a formal written letter demanding immediate payment of outstanding arrears and requesting future rent be paid on time and in full. This letter should ideally be delivered in person. Inform your tenant that failing to pay rent could lead to court action.
Even if your tenant owes rent, it is important that you don’t enter the property without permission, remove any belongings, or change any locks as you could be in breach of the law. You need to ensure that the correct legal procedures are followed.
If their rent is still overdue after 14 days, send them another letter advising them that you intend to apply for a possession order and will be seeking possession if they continue not to pay. You should also write to their guarantor at this stage if, they have one.
After 21 days of the rent being due, send another letter to the tenant – and to the guarantor if applicable.
Under the Housing Act 1988, you can legally evict tenants with assured shorthold tenancies using either a Section 8 or a Section 21 notice. More information about how much notice you need to give tenants can be found here.
You can evict a tenant at any point during their tenancy if they have breached the terms of their tenancy agreement, this includes failure to pay rent. Make sure you have evidence of any unpaid rent and your endeavours to resolve the issue, in case the tenant decides to challenge the eviction notice.
Currently, you can ask your tenant to vacate the property without giving a reason by serving a Section 21 notice. However, you can only do this if the tenancy is at the end of its fixed term or if they are on a periodic tenancy without a fixed end date.
In England and Wales, you can’t serve a Section 21 if you haven’t met the legal requirements expected from you as a landlord. These include; ensuring you have registered your tenant’s deposit in a government-backed scheme, and ensuring they have a copy of the property’s energy performance certificate, gas safety certificate and the How to Rent Guide. More information can be found on the government website. If you’re not sure which notice you should serve, you should seek legal advice.
Be aware that the government plans to change the law around Section 21 as part of its Renters Reform Bill, detailed in the white paper that was published in June 2022.
If your tenant continues to not pay their rent and does not make an effort to come to some resolution, then you can apply for a possession order to seek possession of the property and also make a claim for the arrears and any other reasonable costs incurred.
The court may instruct the tenant to leave the property by a certain date and order them to pay off the arrears and legal costs. Alternatively, the tenant may stay in the property as long as they agree to pay everything they owe and continue to comply with the terms of the tenancy agreement.
The judge also has the power to add a monetary judgement against the tenant. If tenants fail to pay the amount owed, then landlords can apply to enforce it by sending court bailiffs to the property or making a request for money to be taken directly from the tenant’s wages to recover the debt. You have six years to enforce a money judgement.
There may be a legitimate reason why your tenant is late with their rent payment, so it’s important to speak to them to understand their situation better and maintain a good relationship.
Common reasons for late rent payments include;
You cannot guarantee that a tenant will never fall into rent arrears, but here are some steps you can take to mitigate this risk. These include:
It may be helpful to read our article on how to find a good tenant.
If you think you may struggle to pay the mortgage if your tenant falls into arrears, it is worth looking at landlord insurance policies that would cover you for unpaid rent and any other implicated costs of evicting a tenant.
If you are a landlord, with a property in Brighton or Hove, we can help with any aspect of letting property – including dealing with arrears. Contact us today.
Do you have any questions about the topic above? Our team of experts is here to help in answering any query you may have.
Fueled by his desire to be the best, most reputable estate and lettings agent in town, Steve has spent his career cultivating The Property Shop. Steve prides himself on his authenticity, honesty, and knowledge-base which is emulated by The Property Shop and his team.
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