How to Recover Rental Arrears From a Tenant
The Welsh government recently announced the Tenancy Hardship Grant for private renters who find themselves with eight or more weeks’ worth of rental arrears due to the coronavirus pandemic. The £10 million kitty will, according to Welsh Climate Change Minister Julie James MS, help “prevent homelessness in Wales.” But what if you are a landlord or letting agent that is not based in Wales or if your tenant has fallen behind with their rent for some other reason? How do you recover rental arrears from a tenant? This article explains it all.
1) Talk to Your Tenant
The first step should always be to attempt to communicate with the tenant. Find out why they have not paid their rent and whether they expect to be able to pay any time soon. Making contact in a non-accusatory manner helps gain their trust and hopefully means that you can resolve any issues early on before they get out of hand.
It is much better to cooperate with each other than immediately create a division, as that can lead to the breakdown of communication and make the process more difficult.
It could be that there is a simple explanation for them entering arrears and that they can quickly put in place a process whereby they will pay what they owe in good time. They may have their own ideas about how they will get themselves out of this situation. It could be a rental holiday, an instalment plan, a reduction in rent or something else. You have to decide whether any of these courses of action will work for you. Consider how good a tenant they have been and whether the costs and effort of evicting them is worth it in the long run.
2) Send a Formal Demand
If attempting to speak to the tenant informally hasn’t worked, you should formally demand the unpaid sum. Send a letter either by first class recorded mail or hand-delivered. It should state that failure to pay could lead to court action and that you could apply for possession should they fall more than two months behind with payment.
3) Talk to Their Guarantor
If the tenant does not respond and has a guarantor, it is worth talking to them about the next course of action. The guarantor knows that they will be liable if the tenant cannot pay back the debt, so they are motivated to talk to them and persuade them to find a solution.
Whereas, as a landlord or letting agent, there are rules against disturbing the tenant’s quiet and peaceful enjoyment of the property, there are no restrictions on the guarantor contacting the tenant and attempting to resolve the situation. This makes them an effective tool in trying to recover rental arrears from a tenant.
Ensure that the guarantor is liable by studying the guarantor agreement. It may state that they are only liable during the initial fixed term period of the contract, for example.
You could attempt mediation to try to come to an agreement. There are a number of specialist tenancy mediation services around that help resolve disputes. It might otherwise be a job for a letting agent to act as an informal mediator between landlord and tenant. Anything you can do to reach an agreement is worth trying.
5) Final Warning
Once there are two months’ rent owing, you can take steps to claim possession of your property. However, before you do so, you should try communicating with the tenant and guarantor again. If you can come to an agreement that suits you at this stage, it will save you a lot of time and effort.
Write to the tenant, stating that they are now two months in arrears and that you will soon attempt to regain possession of the property.
6) Serve a Section 8 or Section 21 Notice
A Section 8 notice is used to inform tenants who break the tenancy agreement in some way, including by building up arrears of two or more months’ rent, that you intend to take the case to court to regain possession. You should give at least two months’ rent. During the coronavirus pandemic, this was extended but returned to two months from the 1st of August.
However, some landlords opt to use a Section 21 eviction especially if the tenancy is due to finish soon. This now requires a four-month notice period after the end of a fixed-term tenancy for the tenant to leave the property.
The Renters’ Reform Bill might bring an end to Section 21, but that is yet to pass through parliament.
7) Accept the Court’s Decision
The court will decide on the outcome of your case and, if you are seen to be in the right, they can:
Demand the tenant leaves the property before a specified date
Demand that the tenant leaves the property and pay a specified amount to cover rent arrears, court fees and legal costs
Allow the tenant to stay on the understanding they pay the money owed
Rule that the tenant pays you a specified amount
Even if the tenant still can’t pay the amount owed, you can recoup some of the arrears from the tenancy deposit. It is also worth looking into landlord protection insurance, which will pay out in these situations.
We look after rent collections, tenancy administration and many other aspects of your property management to ensure that you do not have to spend time that could be best allocated elsewhere. Contact us today to find out more.