What to do if your residential tenant is not paying rent?
The major problem that most residential landlords have is that their tenants stop paying their rent. If your residential tenant stops paying their rent, there are lots of options that you can take. It is advised that you deal with it straight away, don’t let the time keep going by, by ignoring the fact that rent is owed. If you make the tenant aware straight away and take action, you can make sure the arrears do not get out of hand.
1. Talk to your tenant
As a residential landlord you should speak to your tenant to find out if there are any reasons why the rent hasn’t been paid. If the tenant has always made the payments on time and for the correct amount, it could be a temporary issue or something as simple as a banking error. You might be able to come to an agreement about when the rent can be paid. Whatever terms you agree should then be put in writing so there is a clear understanding of what has been said.
It would also be advised to speak to the tenant first on an informal level, by just picking up the phone, dropping round to see them (if they are ok with that) or sending them an email. If you don’t achieve anything from this, you could send them a formal letter explaining the consequences of not paying.
Check there is no dispute. For example, are they holding back rent because they say you have not fixed something at the property? With residential property, in certain circumstances your tenants may be allowed to withhold the rent until repairs have been done, but not in every case. Speaking to your tenant would find out if there are any issues. If you agree that the works need to be done, then the sooner they are dealt with, the sooner you should get paid.
2. Consider reducing the rent
If the residential tenant has been a good tenant and now cannot afford the rent due to a change in their circumstances, you could consider giving them a temporary or permanent reduction in their rent, in order to keep the tenant in the property and not have it empty. If you reduce it for a short period of time it could be good for both you and the tenant. It could save you money by not having to find a replacement or not having it empty for any period of time.
If you are only reducing it for a short period of time, make this clear in writing to the tenant indicating the date in which it will return to the previous amount. You may need an amendment to the lease, licence or Assured Shorthold Tenancy.
3. Explore housing benefits
The reason your tenant might be unable to pay could be because they have lost their job, in which case they might now be eligible for allowances from the government. Advise your tenant to speak to the local council.
4. Check your agreement
Does the tenancy agreement explain what you can do if the tenant doesn’t pay? The tenancy agreement might have a clear clause that indicates exactly what you can do if the rent payment is missed. You may need to take legal advice on your options.
5. Keep evidence
If you are speaking to your residential tenant regarding rent arrears then keep records of everything. If it goes to Court, then you will want to show that you have been discussing the rent arrears and that you have provided guidance and support regarding a way to resolve it. With residential property in particular, courts are cautious about evicting people, especially if there are children involved.
Keep all written correspondence, this can then be used should you need to issue legal proceedings. Even if you and the tenant come to an agreement regarding missed payments and a plan to make up the payments, get it all in writing and keep a record of it.
6. Is there a guarantor?
The tenant might have provided a guarantor. This is a relative or friend that has agreed to pay the rent if the rent is missed. If there is a guarantor, then get in touch with him/her and make them aware that the rent hasn’t been paid. This could speed the process up of getting your rent paid.
If none of the above work, then you might want to consider giving your tenant notice if it’s a residential property or evicting them if it’s commercial property.
Notices in residential property
If your tenant still cannot or will not pay, then you can notify your tenant that you would like them to leave. There are a few notices you could serve depending on the type of tenancy you have. A Section 21 or Section 8 notice under the Housing Act 1988 and Section 146 of the Law and Property Act 1925.
We would strongly recommend that you take legal advice before you serve the notice as making sure you get the right notice served, and serve on the right day is essential.
This notice means you can take back possession of the property at the end of the tenancy agreement, or if you have one then you can trigger a break clause. When you serve a valid Section 21 notice you don’t need to provide any reason. This notice must provide the residential tenant with at least 2 months’ notice.
If the tenant stays past the date given on the notice, then you can apply to Court for a possession order. You must do this within 6 months of serving the section 21 notice. The Court allows the tenant to complete the defence form if they want to challenge the eviction. Once the Court has received the defence form, they will then make a decision about whether or not there is any need for a hearing. If there is no need then the Court will make a decision from the papers.
The Court can decide to either dismiss the matter if the section 21 notice isn’t valid or order the tenant to leave if it is valid. The Court will usually give the tenant around 2 weeks to leave.
If the tenant doesn’t leave after a possession order, then it can take about 2 months for the court to agree that the bailiffs can evict them.
This notice is served if you have grounds for eviction. For example, in the case where the tenant is not paying the rent. You can also use them if the tenant is causing a nuisance or damaged the property. If the tenant has breached the terms within the tenancy agreement, then you can terminate the tenancy within the time.
If the residential tenant disputes it, you could end up in court where you will need to provide evidence for the reason of the eviction. Therefore, it is so important to give records of everything and ensure you have good grounds to evict. However, if you have a break clause then it might seem more effective to serve a Section 21 notice as appose to a Section 8 notice.
It is possible to serve both a Section 21 and Section 8 notices at the same time.
In commercial premises, a section 146 notice must be served on the tenant for the right of forfeiture to be exercised. For non-payment of lease, the landlord must first demand the rent.
This notice is served by the landlord. It is served because they wish to commence forfeiture proceedings against a leaseholder because of a breach of the lease under Law and Property Act 1925.
Rent Guarantee Cover
Even if you think you have the best tenant and have had no issues, any tenant can suddenly end up with cash flow problems. You might want to think about getting an insurance policy in place. Rent guarantee cover is an insurance policy that you can get. It covers for any missed rent payments for a period of time.
Disclaimer – our articles are designed to give you guidance and information. There is no substitute for proper direct advice, particularly as everyone’s circumstances are different. If anything in this article may affect you, please contact us for advice that is specific to your circumstances.