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3 years ago | 51 comments
How to recover rent arrears debt?
9:24 AM, 26th June 2023, 3 years ago
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Hello, do former tenants owe you money? Here’s how we deal with this:
For many years we could not find any debt recovery companies to take on the challenge of trying to recover debts from our former tenants. As most of our tenants were in receipt of benefits at the time of their occupation with us, the debt collections companies just did not want to take on these cases.
A few were willing, but only if we paid them large sums in advance with no guarantee of a successful recovery of the debt. Then, a few years ago we found a company who were willing to take on our cases on a ‘no win, no fee’ basis, i.e. they would only charge us a 15% commission on any debt they ACTUALLY collected.
Over the past few years we have gradually developed a much more streamlined process for rent arrears/damage costs debt recovery, with all the costs eventually being paid by the debtor (not by us). I am going to share the basic outline of the process with you, as I feel that tenants should pay the rent they agree, and they should be held responsible for any deliberate damage they cause.
- Step 1: Complete a Debt Recovery Instruction form. This will provide the debt collection company with the information they need.
- Step 2: The debt recovery company will carry out a trace, to ascertain the current address of the debtor. If the trace is successful, there is a fee of £54 (this can be re-charged to the former tenant, if your AST allows for the debt recovery costs to be charged to the tenant). If the trace is unsuccessful, there is no fee and the process does not go any further (put on hold and try again at a later date).
- Step 3: The debt recovery company sends out up to three debt collection letters, followed by a Letter Before Claim. There is no charge to the landlord for this process, unless it results in payment by the debtor, at which point the debt collection company will deduct their 15% commission. (This fee (commission) can be re-charged to the tenant if your AST allows for this).
- Step 4: The debt collection company will prepare and issue a county court claim on behalf of the landlord. There is a charge of £80+VAT for doing this, plus the court fee (variable depending on size of the debt). Again, this fee can be recharged to the tenant, assuming the AST allows for this. This should result in a County Court Judgment (CCJ) against the former tenant for the original debt owed, plus all charges incurred.
- Step 5: This is where the debt (if over £600) is Transferred Up to the High Court for a Writ of Enforcement, but before this can happen the debt collection company will issue the landlord with an invoice for £71 for the court fee. This should result in obtaining a High Court Writ of Enforcement against the former tenant, for the full debt plus statutory interest plus the £71 court fee. A Notice of Enforcement will then be sent to the former tenant.
- Step 6: High Court Enforcement Officers (HCEOs) aka High Court Bailiffs/Sheriffs will visit the former tenant to recover the debt owed to the landlord, plus their enforcement costs. IF, after a minimum of 3 visits, the HCEO cannot recover the debt, the landlord will have to pay a ‘Compliance Fee’ of £90.
As you can see, the process passes on the costs to the former tenant, so that the landlord does not have to bear the cost of the debt recovery, so long as a recovery is eventually successful.
At all points along the process, the former tenant is able to offer to make a payment plan, but the further into the process the more costly it will be to them.
If you would like further details, or the template instruction form, then please message me direct.
Thank you,
Robert
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Member Since October 2013 - Comments: 1310 - Articles: 10
11:07 AM, 27th June 2023, About 3 years ago
Reply to the comment left by Anthony Smith at 27/06/2023 – 09:58Hi Anthony,
My email address ([email protected]) is already posted twice above, and again this morning on the reply to Ibe. I’ve also answered in relation to Scotland (first post on page 2 of this thread).
Member Since March 2020 - Comments: 3
2:12 PM, 27th June 2023, About 3 years ago
We have tried a money claim though the courts but have never recovered any money.
I would like to try your method to recovery some of the debt.
please send me your template plus debt recovery company details.
I ve sent my email address to you direct.
But what I see is that as long as Government allows tenants not to pay and get away with this behaviour and just re house non payers, they will continue.
Australia has a two week non payment and then you are evicted. Guess what? People pay their rent.
Member Since March 2020 - Comments: 3
2:13 PM, 27th June 2023, About 3 years ago
We have tried a money claim though the courts but have never recovered any money.
I would like to try your method to recovery some of the debt.
please send me your template plus debt recovery company details.
I ve sent my email address to you direct.
But what I see is that as long as Government allows tenants not to pay and get away with this behaviour and just re house non payers, they will continue.
Australia has a two week non payment and then you are evicted. Guess what? People pay their rent.
Member Since March 2023 - Comments: 1506
2:19 PM, 27th June 2023, About 3 years ago
Reply to the comment left by RHP at 27/06/2023 – 14:13
As I have said in a previous post, even using the Sheriffs my recovery rate was around 20%.. When you take on a tenant you need to make a note of any car registration so that can be passed on to the Sheriffs.
Member Since April 2023 - Comments: 4
8:30 AM, 1st July 2023, About 3 years ago
This is really valuable well-presented information. Thank you for sharing, Robert.
Comments: 1
4:20 PM, 21st July 2023, About 3 years ago
That’s specifically listed as not allowed under the tenant fees act https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/922900/Tenant_Fees_Act_-_Tenant_Guidance.pdf#page63
“Q. Can a tenancy agreement include a clause that says in the event that legal fees are incurred for evicting the tenant, the tenant will have to cover the legal fees? No, we consider this would be a prohibited default fee provision which is requiring a payment in the event of the default of a tenant. Landlords, agents and tenants are responsible for their own legal costs resulting from a dispute of the tenancy agreement.”
Member Since October 2013 - Comments: 1310 - Articles: 10
6:46 PM, 21st July 2023, About 3 years ago
Reply to the comment left by W S at 21/07/2023 – 16:20Hi “Warwick Sale”
Thank you for your link. I believe that a tenancy may not be able to include a clause imposing “default fees”, but my understanding is that it can include a clause advising the tenant that they will be liable to pay damages for losses (costs) reasonably incurred by the landlord as a result of the tenants’ breach of the tenancy conditions. Such costs could include “actual” debt recovery costs (as these are NOT “default fees”), as they only become reasonably incurred as a result of the tenant’s breach of their legal obligation to pay the rent.
“Damages” for costs reasonably incurred as a result of the tenant’s breach are not prohibited under the Tenant Fees Act, and the Guidance you have linked to appears to support this contention.
However, in relation to legal costs, as the guidance says “If the dispute progresses to court, it may make a ruling on how legal costs are to be distributed between the parties.” IMHO this does not appear to alter the position in relation to obtaining a CCJ and enforcing it, as the overriding equitable principle is that the injured party (in this case the landlord) should be put back in the position that they would have been in had no breach occurred, so this principle could encompass the situation whereby the tenant pays the reasonable costs reasonably incurred.
There is also a provision within the Tenant Fees Act for the charging of interest on outstanding debts, from 14 days after the payment became due, (however, this can be surprisingly difficult to calculate, if there are varying payments).
There’s also the long established practice of courts applying statutory interest, that can be charged on judgement debts (once a CCJ has been obtained).