Fri 03 Mar 2023
Paul Bennett, Director
On the whole, tenants rarely cause issues for landlords – something Behr & Butchoff’s letting agents can vouch for here in St. John’s Wood. Sadly, the press like to run stories about the tiny minority and at the moment, the media is trying to make a link between the cost of living crisis and unpaid rent.
The truth of the matter is rent arrears are always present in the lettings sector, but at a low level, and very recent findings published in The Telegraph showed that only 1 in 13 private tenants are now behind on rent payments.
Tenants can make a late rental payment or miss one altogether for very innocuous reasons, such as changing jobs and receiving a different pay day. In other situations, a temporary glitch in finances will be quickly overcome but short-term sympathy is needed. In fact, most landlords would prefer to work with a tenant’s financial circumstances and find a resolution, rather than take drastic action and evict for arrears.
Speaking with a tenant at the first sign of a late or missed payment is imperative. Although a phone call – from the landlord or the managing agent – is the quickest way of making contact, all communication regarding arrears must be put in writing.
If a tenant gives an early indication they may struggle to pay their rent, there are some pre-emptive steps that will help mitigate the problem and ensure cash flow isn’t an issue for either party. Behr & Butchoff recommends the following:-
· Check if there’s a guarantor
The presence of a guarantor will be detailed in the tenancy agreement and they should be contacted as soon as a tenant expresses there is a problem. If referenced correctly, the guarantor will be in a position to pay the rent on the tenant’s behalf until they are financially stable again.
· Apply a rent reduction
If there is any leeway to reduce the amount of rent a tenant has to pay, it can ensure some money is being received. Landlords can work with tenants to establish what might be affordable, setting out in writing what the rent reduction will be, how long the discount will apply for and whether the tenant is expected to repay the shortfall at a later date.
· Permit a rent holiday
A rent holiday is when the landlord suspends the rent payment for a set period of time, maybe one or two months, giving the tenant time to regroup. During the holiday, no rent will be due but as with a rent reduction, the conditions of a rent holiday need to be detailed in writing. It’s super important to note how long the rent holiday will last, if the tenant needs to pay back the missed payments and if so, by when.
Sometimes a tenant won’t let a landlord know if financial troubles are ahead but there are also methods for dealing with unplanned arrears, as follows:-
· Introduce a repayment plan
Most landlords can’t afford to write off arrears but they can set up a repayment plan for tenants, which can be more manageable than paying off what’s due in one lump sum. A repayment plan normally consists of a new monthly amount to pay – the basic rent plus a portion of the arrears. The repayment plan will end when all the missed payments are paid off. Again, all the conditions of a repayment plan should be set out in writing.
· Check which benefits a tenant may receive
Some tenants who fall into arrears or who are struggling to pay the rent are entitled to financial help. If applicable, 20% of the benefit payment is sent directly to the landlord. This agreement is possible if the tenant is in receipt of: Universal Credit; income support, pension credit, jobseeker’s allowance and employment support allowance.
· Recoup arrears from the deposit
In some cases, it is possible to reclaim missed rent by deducting it from the tenant’s deposit at the end of the tenancy. For this to happen, the deposit must have been lodged in a Government-approved scheme; the mandatory prescribed information must have been given to the tenant when the tenancy started; and the tenancy agreement should say that rent arrears is an acceptable reason for deposit deductions.
If a mutually-agreeable plan between the tenant and the landlord can’t be found – and the rent remains unpaid – a landlord may resort to evicting the tenant through the courts. When rent arrears of more than two months have accumulated, a landlord can serve a Section 8 notice, using ground eight.
Not all notices result in an eviction, however, as the tenant can still repay any arrears during the process or apply for the Breathing Space initiative. The latter gives tenants 60 days during which to seek debt advice. During this period, payment demands and eviction action pause. In many cases, a financial solution is found before an outright possession order is granted.
If you would like any advice from the Behr & Butchoff lettings team about renting out a property in the St. John’s Wood area, please don’t hesitate to contact us.