How to Manage Rent Arrears & Get Your Money Back | Decorus for Sage

How to Manage Rent Arrears & Get Your Money Back

Problematic tenants can be very frustrating for property owners. When a tenant cannot pay their rent, it is the landlord’s cash flow that suffers. This means that over time, rent arrears can affect the landlord’s ability to pay their overheads. This can turn into a nightmare to resolve if not addressed quickly, leaving the landlord out of pocket and the tenant with a large, built-up sum to pay.

Thankfully, a logical approach to chasing payments can prevent arrears from getting out of hand. Follow the steps below learn how to claim lost rent back and how to maintain a steady flow of income.

woman talking about rent arrears on the phone

Discuss the Rent Arrears with the Tenant

If the payment date has only just passed, the first thing you should do is call the tenant to find out more. A quick conversation can provide you with some background information on why rent has not been paid. With this knowledge, you can make an informed decision on how to proceed. You may find the missed payment out-of-character for the tenant; in which case you can use greater leniency. Do not fall for the trap of addressing an initial missed payment too aggressively. Whilst irritating, it could cost you an otherwise reliable tenant.

During the call, check whether the tenant has received their invoice as there is always a chance of it getting lost. Double-check their contact details to make sure they’re up to date too. Next, query why they have missed their rent.

You may find out that the tenant’s problem is simple to fix or a one-off situation. By talking to them, you may discover that their payroll has been delayed or they’ve just lost track of the payment date. The situation that a landlord should worry about is when a tenant is expected to have long-term financial strain. This could come in the form of losing a job, developing a chronic illness or by ending up in large amounts of external debt.

rent arrears arrangement, payment plan

Create a New Payment Schedule

If the tenant has a good payment history, you can choose to support them with an alternate payment arrangement. The terms of the new agreement are up to you and can be moulded to the tenant’s financial situation. Strong communication is the key to creating a payment plan which suits both parties.

There are several options for staggering arrears:

To ensure that there is no dispute over payments, you will need to create a new agreement. Make sure that both you and the tenant sign the document and store it in a safe place. If you can, digitally store the document in case the paper copy gets lost. It is also helpful to record all tenant correspondence. This will create a message trail which can be used as evidence if needed.

Send a Notice

If you are having no luck chasing down the outstanding rent, you will want to move on to serving notice. There are two types of notice which can give you the legal authority to evict a tenant:

Section 8

A Section 8 notice can help you evict a tenant that has breached their contract. To process a Section 8, the tenant needs to be at least 2 months in arrears. You can serve this notice anytime, including within the fixed term. The tenant can be evicted immediately, in 2 weeks or 2 months, depending on the situation.

Section 21

A Section 21 notice can be used if a landlord wants to regain possession of a property, but the tenant has not deviated from their contract. It cannot be served within the first 4 months and the notice cannot end before the fixed term.

managing rent arrears, lots of coins

Rent Recovery and Making a Claim

Once you have removed the tenant from the property, you will be able to address arrears properly. As accommodation has ended, arrears will stop growing and you will have a static amount to retrieve.  There are plenty of businesses on the internet who can help you with chasing up payments. Be aware that these services will incur further costs so make sure the rent your chasing is worth it.

Alternatively, if you are looking to recover less than £3000 you can handle this yourself at the small claims court. You can begin your application by heading to https://www.gov.uk/make-court-claim-for-money

 

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