Can I charge tenants for extra admin if they are in arrears?

Following the news from Property118 last week regarding “no win no fee” debt collection for landlords I have been re-thinking my strategy. I have a question though, can I charge tenants for extra admin if they are in arrears?

This is my thought process.

I prefer to manage my own properties. I do use an online letting agent to advertise my properties and for tenant referencing but I also like to deal directly with my own tenants. I don’t see the need to pay a letting agent somewhere between 8% and 15% of my annual rent roll. Sometimes I purchase RGI, sometimes I don’t, I take a view and generally my gut instincts are right.

Now let’s assume I have a tenant who misses a payment and it’s not one of the tenancies I’ve protected with RGI.

What I’ve been considering is whether I could call, text, email them and then if they have not paid up within a week, refer the case immediately for debt collection. I appreciate that it will cost me 15% to recover any arrears if I do this (I’d pay the debt collectors nothing if the tenants don’t pay up of course) but it would save a lot of stress and worry and de-personalise the communication between me and the tenants. If the tenant pays up that’s great, but can I pass on the recovery charge to them and if so, do I have to have a special clause in the AST? If I do, can anybody provide the wording for the clause I would need to use please?

I have already instructed the Property118 debt collection team to chase some historic debts and, as a result, I now have a much better idea how it works. Basically, it’s a 21 day cycle. Therefore, if I instruct debt collectors a week after the rent payment was due, by the time the debt collection cycle has passed, the next rent payment would be due. At this point I would then be able to keep the pressure on by serving section 8 and, assuming the tenancy has gone periodic I could also serve section 21 simultaneously. That seems to me like the fastest way to jump on any arrears problems and gain possession and a money order based on rent arrears.

After I have got the money order I could, of course, re-visit debt collection options for recovery.

The only question I really have is whether I can pass on the costs of debt recovery to tenants who pay late. If so, that’s my new strategy.

It seems to me to make a lot more sense to instruct debt collectors sooner rather than later. It shows tenants that arrears will not be tolerated and is far better than chasing them up only when things get too bad. If they do pay up and also cover my costs I will probably work on a three strikes and you’re out basis, otherwise I think I would just allow them stay on, subject to respecting the properties and the neighbours of course!

I appreciate your readers advice and responses.

Thanks – Alun

Editors Note

The article to which Alun is referring to in respect of “no win no fee” debt collection can be seen by clicking THIS LINK