Other Landlords experiences of successfully getting Rent arrears from evicted HB tenants

Other Landlords experiences of successfully getting Rent arrears from evicted HB tenants

10:47 AM, 12th August 2014, About 7 years ago 83

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Hi fellow members, Other Landlords experiences of successfully getting Rent arrears from evicted HB tenants

Love to hear your thoughts/experiences:

I’m going through the eviction process on two properties which are let to tenants claiming Housing Benefits. They have a combined arrears of over £6,000!

Is it worth the emotional stress (as well as time and costs) to go on a not so fruitful expedition of getting these arrears back after they have been evicted?

Yours  – a very frustrated landlord!

Sanjay



Comments

by chris wright

11:03 AM, 16th October 2014, About 7 years ago

Reply to the comment left by "Robert Mellors" at "16/10/2014 - 10:49":

the 25% - as in the RSL leased situation you said they pay less than the market rate - i assume that they pay at least the LHA rates when you lease it out to them so took that to mean you we're renting property above LHA....the uplift .....but it seems you saying they (RSL lease) pay less than LHA because they rent it out for less than LHA or is the same but knock off @25% for sourcing tenants, managing,repairing, covering voids etc?

by Robert Mellors

19:08 PM, 20th October 2014, About 7 years ago

Reply to the comment left by "chris wright" at "16/10/2014 - 11:03":

Hi Chris

I'm struggling to follow your line of thinking so forgive me if I am interpreting your question incorrectly, but I will try to respond:

A council or RSL leasing scheme usually pays about 20 - 30% below the market rent for that property.

The market rent is not necessarily the LHA rate for that size property, as the LHA rate is set at the 30th centile of the average market rent. (NOTE, average market rent, not the market rent for that particular property).

The LHA rate makes little or no difference to a Council/RSL leasing scheme as they use the properties to provide emergency/temporary accommodation to households that they have a statutory duty to house under the homelessness legislation, and in such circumstances the rent they can charge is not limited by the LHA rate.
Thus, if the market rent is £400 pcm, then the council/RSL may pay the landlord £300 pcm, but they may well be able to let the property as emergency homelessness accommodation for £1000 pcm, even if the LHA rate for that area is £400 pcm (as the LHA rules do not apply to their lettings in such circumstances).

In relation to how my company leases properties, if the market rent for that property is £400, it may be that the LHA rate is £475, and I may let it to my tenants at £500 pcm, i.e. just over the LHA rate. As a private landlord, even a "not for profit" one, my general lettings on ASTs are subject to the LHA restrictions. Therefore, this leasing of properties only works for a limited range of properties, but it does give the landlord a much better rental income than the Council/RSL schemes. The landlord does have the option of letting the property at the same rent as I would, and to the same type of tenants, but they then have all the risks associated with such a letting (voids, non-paying tenants, tenant damage, Housing Benefit problems, eviction costs, etc). The other option would be for me to rent out individual rooms in the property, which involves much more tenancy management but may give a better profit margin/surplus. Either way, the property owner still gets a higher rental income than if they leased to an RSL/Council.

by chris wright

8:11 AM, 21st October 2014, About 7 years ago

if i read it right what you're saying is if you leased the properties off to the council they would only pass you the owner @ 75% of the LHA no matter what?

Re renting to HB tenants that means the tenant gets LHA as a max rent but i'm wondering if you know they are on benefit level income how could they afford £x pw more without running a risk of getting into debt?

by Robert Mellors

8:34 AM, 21st October 2014, About 7 years ago

Reply to the comment left by "chris wright" at "21/10/2014 - 08:11":

NO. The LHA is nothing to do with you if you have leased the house, you get paid the amount agreed in your lease agreement, it is no longer anything to do with LHA (as far as the owner is concerned). The owner simply leases the property at whatever rent is agreed with the organisation they are leasing it to. The organisation that leases the property from the owner is then able to fill the house in whatever way they see fit, and it is that organisation that is the landlord to the actual occupants.

The 75% figure is simply an illustration of the approximate figure that is likely to be agreed, AND it is 75% of the "market rent for that particular property" NOT 75% of the LHA rate (which is based on the 30th centile of the average rent for that size property across a wide geographical area).

by chris wright

8:56 AM, 21st October 2014, About 7 years ago

so you could get an "equal to" the max LHA rate if you leased it out to the council?

by Robert Mellors

9:19 AM, 21st October 2014, About 7 years ago

You can get whatever rent you manage to negotiate with them. In theory, this could be the LHA rate or even more, but in practice it is quite unlikely that they would lease a property at that rate.

Of course, I am speaking from my own experiences and knowledge, which includes having researched such schemes when I was working in Council housing departments, my sister's experience of actually leasing to a Council/RSL, my personal experience of renting such a property from an RSL in the 1990's, and my experience of setting up and running an independent housing association. Things may be different now and may be different in the South East, particularly in London, so if this is what you want to do then make some enquiries with your local authority and see what schemes they have to offer, and what rents they would pay you.

Just a thought, but this has drifted somewhat off the topic of the original posting, and it may be better to have a separate "Leasing to Councils/RSLs" discussion set up, so that other landlords with experience of doing this can add their own experiences.

by chris wright

9:43 AM, 21st October 2014, About 7 years ago

indeed it has drifited a little, back on topic - when renting to HB tenants that means the tenant gets LHA as a max rent but i’m wondering if you as an LL know they are on a benefit level income how could they afford £x pw more without running a risk of getting into debt? What reasons are there for an LL knowingly to rent at a higher rate than LHA to the HB group - surely the risk of arrears and having to finance debt collection because of stretching the tenants finances is akin to chucking rocks in your own path?

by Robert Mellors

9:57 AM, 21st October 2014, About 7 years ago

Reply to the comment left by "chris wright" at "21/10/2014 - 09:43":

If a market rent is £550 pcm (e.g. to professional tenants), but the LHA rate is £475 pcm, then charging £500 pcm to a DSS tenant is in my opinion more than reasonable. The tenant can decide for themselves whether the extra £7 pw is affordable to them. Also, I do not request a deposit, rent in advance, or admin fees just for applying, (as letting agents would do), so I am saving the tenant lots of money right from day 1 of the letting.

by Ray Davison

10:03 AM, 21st October 2014, About 7 years ago

Reply to the comment left by "chris wright" at "21/10/2014 - 09:43":

Chris,
A quick one from me on that is that many benefit tenants have significant other benefit income apart from the LHA they receive. This can come in many forms from various departments and funds. I have known many occasions where one of my tenants has more disposable income (After rent payments) than I have as their landlord (After Rent or Mortgage). Possibly I am doing something wrong and should be on the other side of the fence but I have always believed in looking after myself?

by chris wright

11:01 AM, 21st October 2014, About 7 years ago

good points gents - i'm a specialist debt adviser so have extensive experience of rent arrears, debt and eviction. Most BLI families have precarious knife-edge incomes (lose overtime for 1 week and it's a crisis) and they have no savings or credit to fall back on (they're winging it day to day), any slight shift in the family finances being off work sick, having child care issues and they reach for credit - if thats all gone it'll be rent and or utilities as the lender of choice. Leaving slack in the budget is key to stopping debt. If as you say a large number are simply unwilling to live within their means then it needs to be factored in the business plan as a forseeable loss or hit to your cashflow - large estates can see a natural t/o of @10% of tenancies a mixture of death, delinquency & moving on. All of these events hit cashflow so a fund needs to be sufficient to cover it, it needs the support of a firm policy to go soft (write offs) or hard (court action) on arrears for previous tenants and adjust the fund for those extra costs too.


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