Please Help – 1 AST but some tenants have not been paying?

Please Help – 1 AST but some tenants have not been paying?

15:53 PM, 8th June 2022, About 2 months ago 14

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We have been landlords for almost 15 years – specialising in students. There is always one AST for 12 months (we have no HMO licence and do not need one right now). We have never encountered any problems. We are good landlords, all paperwork is always in order and all repairs are done immediately (within 24-48 hours), so often our students come back after they did their working practice for a year.

Last summer – due to Covid – students’ demand was very low, and we decided to rent the house out to a group of young professionals, on the same 1 AST basis. Two of them working, two of them not, so these two had guarantors. Their AST expires on 31 July.

Since November there have been some problems with rent payments, but generally, after much chasing, the payments have been received. Since March the situation has changed and despite chasing every day and offering them to design their own payment plan – the money has almost stopped coming. We involved guarantors – one is reluctantly paying the longest debt; the other – after initial contact – got completely quiet and does not reply to any correspondence. We chase regularly, both the tenants and the guarantors. The Leading Tenant function is practically not working, all of them pay individually indeed via the leading tenant, but in “how they want and what they want” manner. We reluctantly accept that because otherwise, we would not have received any payment.

The situation with payment is now as follows: 1 tenant up to date, 1 with 2 months debt, 1 with 3 months debt, and one with 4 months debt (that one has the guarantor who does not contact us). At the moment there is zero contact with them, they simply do not bother to reply. We really do not know what to do – we have never encountered such a situation.

Their AST expires soon (less than 2 months), they are moving out and we are worried that we will be left with quite a large sum of outstanding debts, unable to recover that from the deposit. The rent and the deposit are roughly 25% below market rate – due to lack of interest last year. We are not able to write that off – so what sort of legal remedy do we have? How could we make sure that the non-payers get CCJ? We of course will not provide references, but what else can we legally do?

Any advice would be highly appreciated. Thank you very much in advance
Whiteskifreak



Comments

Neil Patterson View Profile

15:55 PM, 8th June 2022, About 2 months ago

Hi, Please can I ask why you think you do not need an HMO licence?

CMS View Profile

16:36 PM, 8th June 2022, About 2 months ago

Reply to the comment left by Neil Patterson at 08/06/2022 - 15:55
I must admit that it does sound like a HMO to me which could be a serious problem and you may be better off just taking the losses.

Answering your question first though. If they all signed the same AST i would expect that they are all jointly and severally liable for the whole rent which means you could go after any of them for the whole amount (harsh i know) but this is up to you.

You just have to make an application to the county court for the outstanding amount. Tenants then either defend or accept it. If court grant the CCJ and no payment is made you can take further action.

What you have to keep in mind though is that if you should have registered this property as HMO the tenants could counter claim an RRO which, from memory, allows them to claim back 12 months worth of the rent. To be fair they could do this without you taking action against them but they may not realise. If you take action against them and they seek legal advice they may be told of the RRO in which case you will probably be paying back far more than you will be claiming.

Silver Flier

18:29 PM, 8th June 2022, About 2 months ago

Reply to the comment left by Neil Patterson at 08/06/2022 - 15:55The Government website https://www.gov.uk/house-in-multiple-occupation-licence says "You must have a licence if you’re renting out a large HMO in England or Wales. Your property is defined as a large HMO if all of the following apply:
- it is rented to 5 or more people who form more than 1 household
- some or all tenants share toilet, bathroom or kitchen facilities
- at least 1 tenant pays rent (or their employer pays it for them)

Even if your property is smaller and rented to fewer people, you may still need a licence depending on the area. Check with your council."

The house in question is rented to 4 sharers, so surely whether it needs a licence or not depends on the relevant local authority's HMO rules. My own LA only requires an HMO licence for five or more occupiers comprising two or more separate households.

Grumpy Doug

23:33 PM, 8th June 2022, About 2 months ago

I'm with Silver Flier on this. I have 6 X HMOs, 4 of which are licensed (5 bedroom) and 2 not (4 bedroom). Totally above board and comply with the council's licencing policy. The poster seems to know this. Money order against all the tenants and their guarantors at end of tenancy. Just the threat will get them moving quickly as it'll be CCJs for all of them. Just make sure all your paperwork is squeeky clean

Whiteskifreak Surrey

0:21 AM, 9th June 2022, About 2 months ago

Reply to the comment left by Neil Patterson at 08/06/2022 - 15:55According to the local regulations if there are 4 tenants on 1 AST in a 2 storey house, there is no need for HMO registration and licence.

CMS View Profile

5:00 AM, 9th June 2022, About 2 months ago

Reply to the comment left by Whiteskifreak Surrey at 09/06/2022 - 00:21
on that basis OP you can just take the positive sections of my earlier post and decide whether you want to go after all of them for the whole amount or stick to what it sounds like you arranged namely a proportion of the rent is due from each. Good luck

Grumpy Doug

9:46 AM, 9th June 2022, About 2 months ago

To reinforce what I posted earlier.
1) make sure all your paperwork is in order and make sure that there is no ambiguity in the event that you are challenged.
2) send letters via recorded delivery to all the tenants and their guarantors stating the joint and severable nature of the contract, and informing them that if all rents are not paid in full that you will be making a court claim for the money against them all. Point out that this will mean a CCJ lodged against each one of them.
I am a student landlord so all my tenants have guarantors. I occasionally get a laggard and a polite nudge usually does the trick. However it's surprising still how effective a recorded delivery letter is.
County court claim isn't expensive by the way - fees shown in this table
https://www.gov.uk/make-court-claim-for-money/court-fees

Neil Patterson View Profile

9:52 AM, 9th June 2022, About 2 months ago

Reply to the comment left by Whiteskifreak Surrey at 09/06/2022 - 00:21
Hi, Thank you for the update as I haven't seen that looser criteria before.

Normally with councils, it's a strict 3 or more people and 2 or more households.

Rod

12:28 PM, 9th June 2022, About 2 months ago

Grumpy Doug seems to have the best grip on both HMO requirements and recovery of debt.

I would add
- number of storeys exemption was removed several years ago. 3 or more = HMO, 5 or more = mandatory HMO, subject to family group or non-main residence exemption
- make it clear at this stage that you will be enforcing your right to recover the rent and that it is likely to impact their credit reference
- serve S21 and S8 to ensure recovery
iHowz partner, SCS Law offer preferential prices for members

Simon F

13:12 PM, 9th June 2022, About 2 months ago

As an HMO landlord, I've used the county court claim approach several times. Usually the first formal letter to tenant+guarantor has the desired effect. Just once I had to go the whole way. Money Claim Online is a fairly painless process. But you do need to send a letter first giving them several weeks to bring the account upto date in which you make clear that you intend to start county court proceeedings otherwise.

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