7 June 2023
15 MIN READ
Dealing with rent arears: What help is there for landlords?
With the cost of living on the rise, there is a potential that more renters will fall behind on their rent payments. As a landlord that may rely on rental income to meet your needs, this can have a big impact on your livelihood.
Late or missing rent payments can be a very complicated issue to deal with from both an emotional and legal standpoint, so it’s important that you think carefully before acting. This guide will help you understand the help available to you and your tenants as well as a step by step process on how landlords can deal with rent arrears.
What are rent arrears?
In legal terms, being in “in arrears” typically means that some payments are late. So a tenant who is in rent arrears is one who is behind on their rent payments. Being behind on rent can have serious implications for the tenant as they could potentially be evicted by you if they continue to miss payments.
Eviction should always be used as a last resort and trying to deal with tenants who are in rent arrears as quickly and compassionately as possible is often a better route.
Who can be a guarantor?
In the renting world, a guarantor is someone that agrees to pay the rent for your tenants should they be unable to. The guarantor legally agrees to be on the hook for the agreed costs, so as a landlord you can ask them to pay up if your tenants don’t.
Largely, who can be a guarantor is up to the landlord’s discretion, however most guarantors will be over 21, have a good credit history and be able to prove that they are financially stable.
You can read more about the ins and outs of requiring a guarantor in our useful guide here. If you have a tenant who is in arrears but has a guarantor, you may want to involve them in this process as well.
READ THE GUIDEHow can you help manage rent payments?
If you typically have a good relationship with your tenant and they have recently fallen on hard times, it is worth exploring ways to help them catch up on payments. If a tenant has generally been difficult, unresponsive, and have continually had late payments then it may be time to consider stricter actions.
Start by having a chat with your tenant to find out what their situation is and ensure the understand the severity of the situation. It is possible that they may not realise that they risk eviction if rent is continually not paid. There may also be an understandable reason why rent is late on this one occasion and they already have a plan for preventing it in the future. Approaching the situation with understanding rather than accusations can be very productive for everyone involved.
If your tenant is close to the end of their tenancy you may want to consider reducing their payments in the short-term so that they can see out the agreement, rather than searching for a new tenant on short notice. This means you’ll still have rental income coming in while you prepare to look for new tenants rather than potentially leaving your property vacant.
If the tenant knows that long-term, they cannot make the rent payments, then reducing the payment amount can be a stopgap until they find new housing and you secure new tenants. It’s mutually beneficial as you still have rent coming in and they still have a home. Make sure that any agreements are in writing and, if they are temporary, have a start and end date explicitly stated. As always, consider getting legal advice for any contracts or agreements that are being made.
If the tenant’s rent issue is isolated to just one month and they’ll be able to pay the full rent moving forward, then setting up a payment plan could help them to repay the missing rent over time. Often this means they will pay each month’s rent in full and on time while also paying back a percentage of the rent owed.
This allows the tenant to slowly pay off what they owe you while still paying their monthly rent and covering other needs. The terms of the repayment deal should be defined in a signed contract that lays out the monthly repayment amount and when the debt is likely to be paid off.
If the tenancy agreement still has a lot of time left on it and the tenant knows they will not be able to afford the rent any longer, then it may be beneficial to you both to release them from the agreement and allow them to move out sooner. This means they can find suitable accommodation and you will be able to find tenants who can comfortably pay the rent. Of course, you cannot force the tenant out without following a legal eviction process, so this would have to be a mutual agreement, not just a decision by you.
What are the laws on how to deal with rent arears and tenants that can't pay rent?
If a tenant falls into rent arrears, they still have their basic rights as tenants. This means that you cannot harass them, kick them out, change the locks, or show up unannounced to the property. All of those behaviours remain prohibited even if the tenant has not paid their rent, and if you do any of them, the law will rule in favour of your tenants.
Rogue tenants have the same rights as tenants who pay on time, so don’t break the law by bothering them. If you feel like you need to take drastic action, consult a legal professional who can guide you through the appropriate eviction processes.
This will typically start with sending a formal letter to the tenant asking for the unpaid rent and escalate to contacting their guarantors if it remains unpaid. You should always keep copies of any letter you send to or receive from the tenant and guarantor during this process.
What help is there for tenants that can't pay rent?
When getting in touch with a tenant about late rent, you can let them know about resources which may be able to assist them in paying it back. While you shouldn’t give any financial advice related to their specific situation, here’s some help available to tenants who are struggling:
If your tenant is out of work, they may qualify for Universal Credit. They can read more about it and the eligibility requirements on the UK Government website.
If a tenant is unable to pay due to a sudden hardship or loss, there are organisations which can give advice or sometimes more direct forms of help. MoneyHelper, Shelter, and Citizens Advice are just a few organisations which may be able to support them. Often the tenant will need documentation to show their situation, so advise them to gather this in advance of talking to one of these organisations.
If tenants claim certain other benefits of tax credits, they may be able to get up to 5 payments to help with the cost of living. Those that are eligible should receive this payment automatically. Find out more on the Cost of Living Payment.
This is additional support for people who already get housing benefits of universal credit but need further assistance for a rent shortfall, to pay aren’t deposit or need help with removal fees. England and Wales use the same scheme while Scotland has its own.
You could be eligible if you’re on a low income or claim benefits. Your bill could be reduced by up to 100% but the eligibility and level of help you get varies from council to council. They can apply online to find out what reductions they may qualify for. In general, if someone lives alone in a property, they are eligible for a 25% discount on their council tax, so if your tenant rents alone ensure they are taking advantage of that.
Sometimes known as the Household Support Fund, councils may be able to help with costs related to energy and water bills, food or other essential items. Check here to read more about support that may be available in your area.
There’s a variety of ways that a tenant could free up some money to cover rent and other essential expenses. They should always consult a financial professional when weighing up these options, but pausing student loan payments or consolidating loans to improve interest rates are two small changes that could potentially help. However, they can also have consequences, so the tenant really needs to weigh up the pros and cons of these actions.
What help is there for landlords that are dealing with rent arrears tenants?
If you’ve directed to your tenant to all of the help above and they’re still struggling to pay rent, you may have to proceed with mediation or even eviction. Hopefully this is avoidable, but if it’s not, here’s some resources that could help you with handling the next steps:
Landlord associations
If you’re part of a landlord association such as the Guild of Residential Landlords, The National Resident Landlord Association or the British Landlords Association, they may have some useful resources to help you. They’ll often have forums where you can hear how other landlords have approached the issue or they may give members access to free legal and mediation services.
Tenancy deposit schemes
It is required that you protect your tenants deposit and use a tenant deposit protection scheme. Depending on the one that you choose, there may be free mediation services to help you and your tenant come to a repayment agreement. If you desperately need the money that your tenant owes you, you may be able to take their deposit to cover the shortfall. However, if the tenant leaves damages or a large mess when the tenancy ends, you will no longer have money left in the deposit to cover those costs, so consider carefully whether or not you want to do this.
Other mediation services
If neither your tenant deposit protection scheme nor your landlord association offers free mediation services, you can seek these out elsewhere for some help on navigating these tough conversations with your tenant who is in rent arrears.
A guide to dealing with rent arrears
From start to finish, dealing with rent arrears can be a difficult process. Wherever possible, it’s best to guide your tenants to the right resources and help that can enable them to stay in the property and no matter what happens, you need to remain cordial with the tenants and ensure you’re following the right procedures.
If you suspect this process may have to end in eviction, consult a legal professional early on to make sure you’re initiating everything properly. Here’s an idea of what to expect throughout the arrears process:
Send a casual reminder
If it’s been a few days since the rent was due, then start by calling your tenant with a gentle reminder that the due date for their rent has passed. Sometimes people have a genuine reason why the rent is late and it can be cleared up quickly from a brief reminder.
Understand the law
Before you take any actions it’s worth consulting a legal professional or services like Citizen’s Advice for ideas on how to proceed without overstepping boundaries. If you are seen to be harassing your tenants, you will almost definitely lose any case against them should this process go to court.
Send a formal reminder
If your casual reminder falls on deaf ears or doesn’t seem to be getting through to the tenant, you should formally notify them of the late rent by first class or hand delivered mail. Be sure to include the date, the potential consequences of rent arrears, and that the current unpaid rent should be paid immediately. Keep track of all communications related to the rent arrears.
Contact the guarantor
If a fortnight goes by without payment or any sort of productive conversation with the tenant, then you may want to contact the guarantor and advise them that the tenant they have guaranteed is now behind on rent.
Consider payment proposals
Usually after a second formal contact with the tenant or initial contact with their guarantor, someone will be in touch to discuss the rent with you. At this stage, you may want to look at repayment deals or other options. This stage is where a mediator may be useful in sorting out the issue.
Send a final demand for rent
If it has been 21 days without rent and no sort of agreement can be reached, you should send a final letter to both the tenant and guarantor which explains that legal action may be taken if the rent isn’t paid. If your tenant has gone a month without paying rent, and another month is now due, you can consider your tenant to be two months in arrears and you can initiate the process to reclaim your property.
Escalation
If two months’ rent are late then under the Housing Act 1988 you have the right to take action to claim possession of your property. Please note that these processes may vary between different parts of the UK so always consult a professional to ensure you are using the process most relevant for the location your rented property is in. Legal action often takes the form of either a Section 8 or a Section 21 notice. These will have different criteria and processes when initiated so learn a bit about each to determine which would be the right course of action for you.
Court outcomes
If your situation goes to court and the judgement is made in your favour, there are a variety of outcomes that could happen. Here’s a few examples:
- The tenant is asked to leave the property by a date specified in the order
- The tenants are allowed to stay under specific conditions or if they pay the rent arrears by a certain date
- The tenants pay a specific amount
- The tenants is ordered to leave the property and pay an amount that may cover rent arrears, court fees or legal costs
If you do get a money judgement against the tenant, you will have six years in which to enforce it.
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