Managing residential rent arrears

Unpaid rent is a particularly frustrating problem for landlords letting property in the private rented sector. Even if rent is unpaid, landlords still have legal obligations and cannot evict tenants without a court order. Read this guide for more information on managing unpaid rent.

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What are residential rent arrears?

The term ‘residential rent arrears’ refers to overdue rent owed by tenants.

Rent arrears can occur for many reasons, such as the tenants struggling to keep up with rent, or refusing to make payment.

Take immediate action

If a tenant misses one rent payment, this can be easily resolved. However it's important to ensure that missed rent payments do not become a recurring issue.

You should let the tenant know that you take missed rent seriously and that you intend to take appropriate steps at an early stage.

You should establish why the rent has not been paid. There could be various technical issues that may not have been within the tenant's control. For example, the bank's system was not working, or the tenant has switched bank accounts and forgot to reinstate a standing order or direct debit.

Remember to continuously keep in contact with the tenant. Keep copies of all communication and evidence as these may be necessary if you eventually decide to take court action.

Most tenants will respond quickly when reminded about a missed payment. You can send them a Rent demand letter. This letter enables you to request immediate payment of the outstanding rent from your tenant.

If after a few days, the rent is still outstanding, you may have need to take further action.

Next steps

If your tenant becomes financially unable to rent the property, it may be best to end the tenancy early. This is a good option if all parties (ie the landlord and tenant) agree. Ending the tenancy early ends liability for rent payments and allows the landlord to move on and find new tenants. It's common to agree to end the tenancy as soon as replacement tenants have been found to minimise the financial impact. This is known as surrendering a tenancy, where both parties agree to end the tenancy. For further information read Surrendering a tenancy.

If your tenant doesn't agree to surrender the tenancy (ie end the tenancy) you will need to serve an Eviction notice. Landlords must be careful not to pressurise tenants into agreeing to end a tenancy, as this could be perceived as harassment or illegal eviction, both of which carry criminal sanctions.

You may need to help your tenant assess their options. Many cases of rent arrears arise due to loss of a job or income. If this is the case, ask if your tenant has made inquiries about housing support or applying for Jobseeker's Allowance. Depending on their circumstances, your tenant may already be in receipt of some form of financial support from the state. It's worth encouraging your tenants to check which payments and credits they may be eligible to receive.

Set up repayment plans

If the problem is likely to be short-term you could discuss repayment plans. If you have previously enjoyed a good relationship with your tenant and both parties are keen to continue the tenancy, it may be possible to agree a temporary adjustment to the rent and/or a way to spread out repayment of any accrued debt.

What if the problem is long-term?

If the problems are likely to be long-term it will be necessary to discuss whether your tenant will be able to afford to stay in the property and if they want to. It may become apparent that it's impossible for your tenant to afford the agreed rent. It's then important to consider the costs of maintaining and ending the tenancy, including the costs of finding new tenants and any remedial works which may be necessary.

Talk to your tenant about how much they are able to pay and work out whether it's in both of your interests to negotiate an adjusted rent until their finances improve. If it seems likely that the tenancy will end as a result of arrears, discuss ending the tenancy early. Your tenant may want to move to somewhere more affordable before they accrue excessive arrears.

Getting a court order

If arrears continue to build, and no agreement can be reached, it may be necessary to obtain a court order to end the tenancy. This can be achieved as a result of persistent under payment of rent but is usually easier if you are owed two or more months’ rent. This can be done by serving an Eviction notice and waiting for the expiry date before applying to court.

It can take a long time to regain possession through the courts. It can be delayed even further if the tenants become difficult or uncooperative. It's therefore important that if you decide to go through the courts process, that you need to act quickly and collect as much evidence as possible from the outset.

If you wish to reclaim any rent arrears from the tenant, you can make a claim through the Small Claims Court. Debt recovery can be expensive and time-consuming. Whether or not you should make a claim will depend on the value of the rent arrears and whether there is any real prospect of the tenant repaying the debt owed. If the tenant is in no position to repay the debt, then it's unlikely you'll be able to recover any money owed.

Avoiding litigation writing off small short-term losses and moving on quickly is usually the best overall scenario.

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