How to Deal with Tenant Rent Arrears

One of the most challenging aspects of being a landlord has to be ensuring rental payments are made on time. Even if just one payment is missed, it can have a serious knock-on effect. Outgoings don’t stop when income does, so it’s vital to be prepared with a strategy around what to do if a tenant doesn’t pay rent, before it turns into a major problem.

Tenants not paying rent is an all too common issue, especially during challenging economic times. But there are some simple steps to follow that will help you navigate your way through the problem, and there are even some strategies that are designed to prevent unpaid rent in the first place.

1.     Get talking

When tenants are not paying rent on time, there could be a simple reason. It may be a temporary financial issue that will resolve itself. Talking to your tenants is a good first step. Maybe they just need a little time, and you could offer some form of payment arrangement over instalments.

Approach the situation with a firm but fair attitude, and remain professional throughout, and you will stand yourself in a good position should further steps become necessary.

2.     Consider a rent reduction

If there is an ongoing but short term issue, perhaps because your tenant has had to take a temporary drop in wages, or cannot work for a period, then you may consider dropping the rent for a time. It can sometimes be easier and a lot less hassle than ending the tenancy and sourcing new tenants.

If you do decide to go down this route, be sure to draw up a written agreement and have your tenants sign it. Include an end date for the reduced rate so that it is clear as to when the rental payments will return to normal.

3.     Direct tenants to sources of help

If your tenants are unable to pay their rent due to having lost their jobs, or perhaps because their personal situation has changed, they may be eligible for government help.

There are a number of lines of support available to tenants who may be finding it difficult to make rental payments, including the Coronavirus Job Retention Scheme, the Self-Employment Income Support Scheme, and Universal Credit. Loan and credit card repayment holidays, council tax support and energy supplier programmes may also be an option.

4.     End the tenancy

If your tenants are not paying rent because they simply cannot, it may be just as well for you to allow them to end the tenancy early. Breaking the agreement will leave you free to start afresh with new tenants.

If your tenants refuse to leave, then you will have no choice but to go through the process of repossession, although currently this is easier said than done due to the current eviction ban which is due to last until 21 February 2021, with no evictions expected to take place until at least 8 March 2021 other than in exceptional cases.

For the latest on the eviction rules and current coronavirus measures, see the government advice.

5.     Use a deposit collection scheme

The deposit your tenants paid at the start of the tenancy can be used to recover some of the rent that remains unpaid. Whilst it may not cover the full amount, it should go some way towards recovering your losses.

The deposit will have been placed in one of the government approved deposit protection schemes, which means you will need to provide the scheme with evidence that you are owed the deposit because your tenant has failed to pay their rent.

6.     Claim on your tenant default insurance

If you have tenant default insurance, and you meet the conditions set out in the policy, then you should be able to make a claim when your tenants are not paying rent.

You may have to wait until your tenants have got behind with their payments for at least a month, and you may find that there are limits to the cover, as well as other conditions, exclusions and an excess to pay.

What NOT to do when your tenants are not paying rent

There are certain things you are not legally allowed to do just because rent remains outstanding. These include:

• Entering the property without permission
• Changing the locks and denying entry
• Forcibly removing tenants or their property
• Signing up new tenants before the current ones have left

Avoid unpaid rent in the first place courtesy of a rent guarantee scheme

By opting for a rent guarantee scheme, you will completely eliminate that concern over tenants not paying rent. Even when tenants are facing financial difficulties and cannot pay, even during void periods, your rent will still be paid.

The homes2let guaranteed rent scheme not only guarantees a fixed rental payment by standing order every month, it also allows you as a landlord to take a back seat when it comes to managing your buy-to-let investment. Because with our rent guarantee plan, every aspect of property maintenance, tenant sourcing and referencing and everyday management is fully taken care of.

Interested to learn how our guaranteed rent scheme could benefit you? You are welcome to get in touch with our friendly team.