Help! My tenant has stopped paying rent – what do I do?

by Tessa Shepperson

14:48 PM, 22nd March 2011
About 9 years ago

Help! My tenant has stopped paying rent – what do I do?

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Help! My tenant has stopped paying rent – what do I do?

This is the seventh in a series of 10 articles written by specialist landlord & tenant solicitor Tessa Shepperson, founder of the online Landlord Law Service.

Help! My tenant has stopped paying rent – what do I do?

Rent is the big problem that worries landlords.  You will probably have expenses to pay such as mortgage repayments, which will fall due whether or not the tenant is paying their rent.

The most important thing is to choose your tenants wisely so this does not happen; I covered this in my third post in this series.  However, that is no help if you are faced with a non paying tenant.   Here are some tips for you (note that this article is written for landlords of assured shorthold tenancies only):

  1. Keep checking.  Make sure you keep on top of things and check regularly to make sure that your tenant is paying.  For example if tenants pay by standing order or bank transfer, check your bank account  every day to make sure that payments are coming in as they should.
  2. Contact them immediately if a payment is late.  If a tenant stops paying it is very important that you contact them as soon as they default.  Do not wait.  For example, it may not be their fault but may be due to a bank error, in which case they will be grateful to you for pointing it out so they can take the matter up with their bank. Also if they know that you are on the ball and will action non payment promptly it is a disincentive for them to do this.  They will pay if they can to avoid the hassle and cut back on other expenses. If you contact them in person, note that you should also send a letter pointing out that they have not paid rent and asking when it will be paid.  If they fail to answer this, send another, slightly stronger letter, after two weeks.
  3. Try to reach agreement.  It is when the tenants first fall into arrears that is the best time to do this.  The debt will be small and it may be that you can agree something with them. For example, if they are good tenants who you would be reluctant to lose, and the wage earner has lost his job, you may be prepared to reduce the rent temporarily to tide them over.  They will be grateful to you and will probably make payment of rent their top priority.  Better a good tenant in situ paying promptly and looking after the property, than a void.
  4. Document any agreement carefully.  This is important.  Send a letter setting out exactly what has been agreed.  For example, if you have agreed a rent reduction for six months, point out that this is for six months ONLY and that you will expect payment of the full rent after that time.  Also say that any agreement is dependent on them making the agreed payments and that if they fail to pay, you will be at liberty to exercise your legal rights (e.g. eviction). Needless to say you should monitor the situation carefully.
  5. If the tenant is unresponsive.  For example, if they refuse to speak to you.  This is bad news.  If the tenancy fixed term has two months or less to run, or if it is a periodic tenancy, I suggest you serve a section 21 notice now.   Prepare yourself for having to bring eviction proceedings – it may be the only way to deal with this tenant.  Unless you are prepared to let them live in the property indefinitely rent free.
  6. Serve a possession notice after two months.  Once the tenant is in arrears of rent of two months or more then this brings into play the mandatory ground for possession based on rent arrears.  You can use this ground to evict a tenant even if their fixed term has a long time to run.
  7. After your notices have expired consider proceedings for possession.  This is only a short article and I cannot give details here other than to say that if at all possible I advise basing your claim for possession on a section 21 notice.  The reason for this is that a tenant can defend a claim for possession based on rent arrears, for example, by saying that the property is in disrepair and that they are entitled to compensation which will go to reduce the arrears.  This sort of thing does not happen often, but when it does you can get caught up in a long and expensive case.  There is no defence to a properly brought claim under section 21.

The Rent Arrears Action Plan.
This article is based on a section of my Landlord Law membership site called the Rent Arrears Action Plan, which I wrote to help landlords in this situation.  The plan sets out the matters discussed in this article in more detail, plus there are letters you can download and use and checklists you can print off and put with your paperwork to keep a record of what you have done.  There are also possession notices you can use with detailed guidance notes on how to fill them in.  You can read more about the Rent Arrears Action Plan on my website, plus there is a short video explaining how it works on our You Tube Channel.  http://www.youtube.com/user/LandlordLaw .

OTHER ARTICLES IN THIS SERIES

  1. Have you got what it takes to be a landlord?
  2. Make sure your property is legal before you rent 
  3. Check out your tenants or live to rue the day
  4. Why you need to have the right tenancy agreement for your letting
  5. All about tenancy deposits
  6. How to increase rent the proper way
  7. You are here | Help!  My tenant has stopped paying rent – what do I do?
  8. I think my tenant has left, can I change the locks?
  9. What do you do if your tenant won’t leave when their section 21 notice expires?
  10. The various and wondrous ways that tenancies end.

Tessa Shepperson is a solicitor specialising in residential landlord and tenant law. She practices online via her web-site Landlord Law www.landlordlaw.co.uk and blogs at the Landlord Law Blog www.landlordlawblog.co.uk.



Comments

8:47 AM, 26th March 2011
About 9 years ago

Very helpful article.

Are you able to advise what to do with a leaseholder who refuses to pay their service charges. We are a small gang who manage the block and this reprobate is leaving a large hole in our finances.

Thank you

Mark Alexander

9:56 AM, 27th March 2011
About 9 years ago

If you link through to Tessa's web-site and contact her directly I'm sure she will be able to help. If not, please email me mark@property118.com and I will be pleased to refer you to an alternative specialist. We do not receive commission or introductory fees for this service.

Tessa Shepperson

13:10 PM, 30th March 2011
About 9 years ago

Hi Tony

Glad you liked the article.

I am afraid however I only do work with short tenancies and my service does not cover long lease stuff. Sorry!

11:30 AM, 6th March 2013
About 7 years ago

Very well said... But I think personally that if a tenant is not paying rent on time, the property should snatch from him. As the long term problems can create otherwise.

5:29 AM, 7th March 2013
About 7 years ago

You advise the mortgage lender; if he has one that the property will be forfeited if the SC are not paid.
No lender will wish to lose 1st charge over a property for the sake of SC.
So they will pay and add it to the monthly mortgage payment; which will increase by about £5.00
I've been doing this for the past 5 years as I cannot afford service charges; but have no objection to the SC and GR debt being added to my mortgages.
Cost for each mortgage per year; every year; about £120
A lot easier to pay £20 extra per month; per property than come up with £5000 per year which I haven't got.
Also assists me to get more cheap mortgage debt!
I need as much debt as I possibly can.
I know it is a pain to go through the process but this is what the Managing agents have to do.

Howard Reuben CeMap CeRER

8:31 AM, 31st July 2013
About 7 years ago

With my 'landlords' hat on, I have a question;

One of my tenants (Miss X who is part of a joint tenancy - two friends renting / living together) has missed her last months rent and 2 weeks later (ie today) I have now received a message from her co-renter (Miss Y) saying that the Miss X has "gone" and is not coming back. Miss Y is distraught as she has been completely dropped in it.

My own predicament is;

a) I haven't received formal notice from either of them that they are leaving, except a long text message from Miss Y saying that she's also now going to have to go and this weekend is when she's moving out

b) they still have 10 months left on their 12 month tenancy agreement

c) July's payment is late and doesn't look like it's going to be paid any time soon
do I 'evict', do I (can I?) therefore instruct a claim via moneyclaimonline to recover overdue monies owed?

We hold a large deposit however most of it will need to be used to clean and redecorate the house (they have been tenants for 18 months already - completely without hassle or issue, which makes this whole current situation extra 'orrible!), so there is wear and tear to rectify before the house can be re-let.

In summary, what is the 'legal' and yet most speedy and effective route to recover a) last rental payment which is now overdue and b) all rents due until either a new tenant is found or expiry of the 12 months tenancy, whichever comes first?

Many thanks

'Landlord' Howard.

Mark Alexander

9:00 AM, 31st July 2013
About 7 years ago

Reply to the comment left by "Howard Reuben" at "31/07/2013 - 08:31":

Hi Howard, get FCC Paragon onto them. See legal section, third drop down.

Tessa Shepperson

19:07 PM, 31st July 2013
About 7 years ago

Reply to the comment left by "Howard Reuben" at "31/07/2013 - 08:31":

For rent arrears (assuming they do not pay) the best solution really, long term, is eviction. I have an information site here which may help: http://www.howtoevictyourtenant.co.uk/

Otherwise you can get a CCJ via money claim online. But with tenants who do not have the funds, enforcement of financial orders is always problematic. I have known landlords lose thousands.

Mark Alexander

20:17 PM, 31st July 2013
About 7 years ago

Howard

When this is all sorted try to put it into perspective.

Take a look at the costs (your losses) and then work out what it would have cost you to buy RGI on every tenancy you've ever had and work out which way you would have been better off.

If the RGI would have been the cheaper option that's the way to go in future. In my case I've always proven to be better off self insuring.

Also reconsider your policy in respect of requesting guarantors.

Have you tried to cut a deal with your tenants?

This is what I suggest .....

Offer to meet them to discuss a few proposals to help them out of this horrible situation.

Point out how much they owe you contractually and what you could do, i.e. take them to Court, list them with LRS, provide poor references, get a CCJ against them, apply for a garnishee order against their bank account, apply for an attachment of earnings order etc. etc.

Cut a deal with them to accept 25% of this figure on the following terms:-

1) They they sign papers giving you immediate possession of the property
2) They waive all rights to reclaim their deposit
3) They pay the agreed amount over the next two years in equal monthly instalments

If they go for this you will then be in a position to begin marketing the property again immediately.

I hope this helps 🙂
.

Howard Reuben CeMap CeRER

10:25 AM, 3rd August 2013
About 7 years ago

Update to my posting above - the tenants have moved out (no notice, they've just gone) leaving a signed letter stating that they sign over the full deposit back to me to pay towards dilapidations.

The last rent due (on 14/7) remains unpaid, the house is a filthy mess and needs major redecoration, cleaning, fumigation, gardening and replacement of broken blinds, tiles etc.

You would think that we never did a property inspection but we are religious in our visits with all of our properties and for the past 2 years have attended every single property every 12 weeks! This 'mess' re this property has all occurred since last visit.

They have left items (fridge, misc tat etc) and we have sent an email giving them notice to remove by next Tuesday or it's all being disposed of.

Our team of tradesmen have now visited and provided quotes for reparations and the total bill will probably (slightly) exceed deposit held. Our marketing has already now begun and we have our first potential viewer already lined up.

So, my potential financial loss is;

last rent still o/s
excess over and above deposit
future rents due until end of their 12 month tenancy (April 2014) unless a new tenant is found
marketing costs for new tenant (this expense is in their AST should they break the tenancy early)

I hope to have it all rented again (in a clean, spangly new state) within 2 weeks so hopefully have capped any major losses.

This leaves the question;

how do I recover my (potential) losses?

The lead tenant is the one who has said (in so many words) "I'm not paying anything and the landlords won't bother to chase me for it" - she's wrong ... I will!

Thanks

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