You’ve found the perfect tenants, they’ve moved in without issue, and you’re expecting smooth sailing with the tenancy. But then you check your bank account and find that rent hasn’t been paid that month. If your tenant won’t pay rent – What do you do? There are a number of different options available. Here we share our expert advice to help in this tricky situation.

Always remember: There is a huge difference between a tenant that can’t pay rent and a tenant that won’t pay rent.

What can I do if my tenant won’t pay rent?

Figure out a communication plan. So, what should your plan of action be?

When a tenant doesn’t pay, the first thing is a call, email or text to the tenant (the initial check) to ask why.

Keeping a record of all initial communications is key in case it is required as evidence in court. Generally, a grace period of seven days from due date to allow for banking logistics is recommended. If the initial message or call doesn’t work then a formal letter requiring payment forthwith (usually in 7-14 days) is required. Keeping a copy of this letter is imperative. If rent is still not received, then attendance at the property is required. Give 24 hours’ notice that you will be attending to inspect the property to discuss arrears.

Have a conversation with your tenant

Communication is key to resolve any issue with your tenants.

Once you’ve put together a plan on how you’re going to communicate with your tenant, it’s time to have a conversation!

Check your bank statement the day after the rent is due. Your tenant has a responsibility to pay rent on the same day every month as set out in the tenancy agreement, the rent should never be late. If the rent has not been received there may be a simple explanation, a telephone call to the tenant may sort the matter out very quickly. Whilst the non-payment may be a genuine banking issue or glitch, be aware of your tenant using their bank as an excuse, rather than a reason. If a standing order has not been honoured, its most likely due to insufficient funds in the tenant’s account. In this event ask the tenant to make an immediate transfer to your account via online banking – if they decline to then you can be pretty sure that they do not have the funds available to pay and you should raise your level of concern.

Non-payment of rent does not always mean you have a bad tenant. Sometimes their personal circumstances may change throughout the tenancy, such as losing their job or suffering from ill health and relying on sickness benefits. Again, communication is key to determine a change in circumstances and to discuss and agree a plan, but also to give your tenant advice and guidance on where they can seek assistance.

Contact their guarantor

If additional security is provided by a guarantor, now is the time to find their contact details and remind them of their agreement to pay the rent should the tenant not be able to. As with the tenants, keep any conversations and emails professional.

When speaking with tenants who have provided a guarantor, advise the tenant that you have a duty to the guarantor to alert them to their exposure to liability to pay the rent if the tenant cannot or does not. Depending upon the relationship between tenant and guarantor, the tenant being reminded of their guarantor’s liability can often work well to motivate the tenant to focus their efforts to pay the rent.

Check your landlord insurance

In the current economic environment Landlord Rent Guarantee and Legal Expenses Protection insurance is now an essential part of a landlord’s armoury to safeguard their investment and proves invaluable in the in case of situations when rent is not being paid.

Such policies provide additional cover also, such as:

· Property Owners Legal Disputes

· Repair & Renovation Disputes

· Health & Safety Prosecutions

· Evictions

· Attendance Expenses

· Vacant Possession Cover – sums paid for a period after eviction, to cover and reinstatement works

· Dilapidations cover

If you don’t have Landlord Rent Guarantee and Legal Expenses Protection insurance, now is the time to get it. But please check the T&C’s of the policy very carefully so as not miss the claims window or disqualify cover by the standard your tenants references.

If you need any advice or guidance of these policies, please call Matthew White at Hose Rhodes Dickson on 01983 521114 or email matthewwhite@hrdiw.co.uk

Solutions to make it easier for your tenant who can’t pay rent

If you are able to resolve the problem and the rent is paid, it is worth looking at solutions to make sure the tenant can pay on time in future.

If you understand the reason for a late or non-payment of rent, you are able to look at simple solutions. For example, an alteration to the rent payment date so it coincides with the timing of the tenant’s pay day, or a payment plan if the tenant is struggling to make a single larger payment per month. This will prevent the situation from escalating.

Reduce the rent

There may be a good reason why your tenant keeps missing their payments. They may be struggling with personal issues, such as caring for a family member – which is impacting them financially. If you believe that you have a good relationship with your tenant, consider reducing their rent for a couple of months. You can agree upon a length of time and state when the regular rent payments will resume. If you consider this, first ask the tenant to complete a ‘fact-find’, this is normal practice for any professional letting agent. Ensure that the terms of any agreement to reduce the rent are clearly and carefully documented, including any terms that relate to the repayment of any sum or sums should the terms of the reduction include deferred payments, rather than a simple reduction.

Let them know about any benefits they may be entitled to

Your tenant may find paying rent a struggle due to work or relationship issues. They may have been let go from their job or have recently split from their partner. If this is the case, they may be entitled to Universal Credit that includes payments towards housing as well as Local Council Tax Support, which will reduce their monthly outgoings. Your local Council’s website should provide details of both, together with links to application forms that you can share with your tenant to facilitate and expedite the application process should they be entitled.

What to do if your tenant is unresponsive or refuses to leave

A tenant that is totally unresponsive and or outright refuses to leave is every landlord’s worst nightmare. If this is the case, you may want to consider stronger alternatives.

Consider taking legal action

If communicating clearly and giving the tenant time to pay hasn’t resolved the issue, it is time to consider legal action.

Matthew White of Hose Rhodes Dickson with 30 years’ experience in lettings sector invites landlords to reach out to him for advice and guidance. Matthew can be contacted via FACEBOOK, by email, matthewwhite@hrdiw.co.uk or by phone 01983 521114.

Your rights: The Housing Act of 1988 and 1996

The Housing Act of 1988 as amended 1996 gives landlords two options when it comes to taking legal action against a tenant.

In the event that the tenant is not keeping up to date with their payments of rent and the landlord wishes to exercise their rights under the provisions of The Housing Act 1988 as amended 1996, the landlord or the experts acting as agents on their behalf must decide on the most appropriate course of action to achieve the landlord’s objective to secure possession or the property through either voluntary surrender of possession by the tenant or if not given, by forced eviction.

The course of action can depend on whether the tenancy is in a fixed term or a periodic state. The latter allowing the service of a no-fault notice of at least 2 months (*November 2021) at any time under the provision of Section 21 of The Housing Act 1988. The former enjoys the same Section 21 provision, however the notice (at least 2 months) must not expire any sooner than the end date of the fixed term or in the case of an initial 6 month fixed term, two to three days after the end date of the fixed term of allow for the service or the notice. Waiting for end of a fixed term may, however, be too long to wait if the arrears of rent are considerable.

The other route to seeking possession is via the provision of Section 8 of The Housing Act 1988. Historically lettings experts have advised landlords to pro-actively seek possession using the Section 21 provision of The Housing Act 1988, which is ‘no-fault’ notice of the landlord’s intention to seek possession of the property. ‘No-fault’ meaning that no specific reason or ‘ground’ needs to be cited to seek possession. However, with the complex requirements and punitive implications of non-compliance with The Deregulation Act 2015, seeking possession under the provisions of section 8 is ‘clear-cut’ with no risk of falling foul of non-compliance technicalities of The Deregulation Act 2015. As long as the qualifying criteria is met to use one or a combination of the 17 grounds that can be used for seeking possession of the property under Section 8, and if one of the grounds being relied on is one of the given ‘mandatory’ grounds for seeking possession, a Court, if satisfied that the notice is correct and has been served correctly, the court has no choice than to grant the landlord possession.

However, one still needs to be experience and competent in the preparation and service of a Section 8 notice and you should appoint a competent expert agent or solicitor to prepare and serve any notice when seeking possession.

When using Section 8 the rent must be at least 2 months in arrears when both serving the notice and at the time of the court hearing. The notice period is 2 weeks, after which if the tenant has neither paid up or vacated the property the landlord can apply to the County Court for an Order for Possession. If the tenant pays off some of the rent before or even at the court hearing and the arrears at the time of the hearing at less than a sum equal to 2 months’ rent, the mandatory ground 8 will be invalid. An expert in tenancy law would also include discretionary grounds in the serving of a section 8 notice that relate to unpaid rent and the late payment of rent.

Matthew White, Director in charge of lettings at Hose Rhodes Dickson recommends, “that landlords, unless fully conversant and experienced with the preparation and service of notices should not attempt to prepare and serve possession notices and should engage an expert in lettings”.

Keep and maintain records of rent payments

Be sure to keep clear records of all communications and decisions while you are trying to secure the payment of rent from the tenant. It may be needed if you go to court, although hopefully, the dispute won’t reach that stage.

You should ensure that you keep a record of all contact with the tenant, an up to date and accurate statement of account and copies of letters or notices served to a tenant.

Actions you CAN’T and MUST NOT take if a tenant refuses to pay

Change the locks – not under any circumstances must a landlord change the locks. Changing the locks is deemed an unlawful eviction and the landlord will be open to prosecution and penalty under the Protection from Eviction Act 1977.

Remove a tenant’s contents and possessions from the property – another big no. The law that covers this is the Torts (Interference with Goods) Act 1977.

Enter the property without the tenant’s permission – as a landlord, you can only enter the property if the tenant has given you permission, or you have permission from the courts.

Need help?

If you require advice and guidance on rent arrears, seeking possession of a property, or indeed any aspect of the letting and management of residential property, call Matthew White of Hose Rhodes Dickson Property Experts on 01983 521114 or email matthewwhite@hrdiw.co.uk .