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

by Readers Question

15:15 PM, 22nd April 2013
About 8 years ago

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

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

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 


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Comments

JohnCaversham

11:43 AM, 26th April 2013
About 8 years ago

Great thread, could i add something along the lines of (below) to my tenancy agreements?:-

"If the rent still remains unpaid 7 days after its due date, no notice will be given and a debt collection agency will be instructed to collect all unpaid rents. All administration costs for the agency will be added to the outstanding rent owed, which generally amounts to an additional 15% of the amount owed being added."

Mark Alexander

11:46 AM, 26th April 2013
About 8 years ago

Hi John

That's the sort of thing I was hoping for and Alun too I presume? We now need a legal eagle to draft something for us which is definitely going to be enforceable in a Court of law if it comes to it.

12:10 PM, 27th April 2013
About 8 years ago

This a depends on the terms and conditions of your tenancy agreement. Normally this will show an ability to charge a set fee for late payments.

10:51 AM, 29th April 2013
About 7 years ago

The relationship between tenants and landlords are governed by the terms and conditions agreed to when entering into a lease agreement. Any charges not agreed to when entering into an agreement of lease will only become due once the lease is cancelled and you sue for recovery of damages; in which case the courts will decide whether you are entitled to the required relief, or not. In order to keep the claim "liquid" you must include the required relief in a 'remedy of breach clause' within your lease agreement. Both parties must agree. Ensure that the directors sign personal surety on behalf of your tenant where the tenant is a legal person.

3:45 AM, 23rd May 2013
About 7 years ago

another sleepless night worrying tenants' debts and how to collect.., glad to have found this site....mark, how did your recent collections 21-day cycle turn out?

Mark Alexander

8:21 AM, 23rd May 2013
About 7 years ago

I have a confession to make, I went on holiday and haven't got around to putting my papers in yet. I did submit one claim though for a guy who I loaned £8,000. We are now at the end of the cycle and the money has not been collected. In all honesty I didn't expect it to be as he's as slippery as an eel. However, I now know a lot more about him and I also know it's worth my while progressing a claim through the courts against him, as he has asetts and no other debts, so that's what I will be doing.

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