Resolving LHA rent arrears and overpayments
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LHA Top Tips for landlords. Article 7 in a series of 8
If prevention has failed the next best thing is speedy resolution.
- Be organised. Know when your rent or rents are due and what date you are expecting top-up payments. Never allow arrears to mount up before taking action.
- If there was ever a time when communication is key then this is it. How you communicate with your tenant and the boundaries you have set for offering them support are critical in dealing with financial arrears.
- As soon as a rent or top-up payment is overdue phone the tenant and continue to do so every day until you make contact. If you are getting no response vary the times of day that you call and withhold your number. Some tenants will bury their head in the sand and try to ignore you.
- A tenant who is not willing to communicate with you is behaving unreasonably as the situation will only get worse. Use their personal contacts which you have previously obtained with their permission and contact family members who may be able to help you to make contact.
- You should also inform the relevant council contact that you are not receiving rent payments. If the arrears are more than one month and one day (the equivalent of 8 weeks in monetary terms) ask for rent to be paid direct to you.
- If you have been unable to make contact with your tenant after a few days send them a letter. The first letter should be conciliatory in tone. State that you understand that it may just be an oversight and remind them of their obligation to pay.
- If you have no contact or resolution after a week phone the guarantor and explain the situation. Ask them to contact the tenant. At Castledene we always explain to the guarantor that if the tenant doesn’t pay then we will be taking legal action against them. Remember that if the guarantor is a homeowner then they have more to lose than a tenant.
- If you still have no response, send a second letter which is more forceful than the first. Ensure you give all your contact details and state that you will take legal action if they do not get in touch to discuss the arrears. You should also state that you will be visiting the property to arrange a face to face meeting. Always give 48 hours notice before you visit.
- Speak to the solicitor you use for other work and see if they will send out a free legal letter to the guarantor and/or tenant. It’s amazing the effect a letter has when it is on a solicitor’s letterhead.
- When you visit the tenant be prepared to organise a payment plan if you believe that they genuinely warrant some support and tolerance. Consider their standing as a tenant, how well they have cared for your property, whether there have been previous financial issues, and what their level of debt may be. You need to balance this with the costs associated with changing tenants and a potential rental void. You may be prepared to write off part arrears if this enables you to keep a good tenant.
- As part of discussing a payment plan with the tenant advise them that you may contact the DWP and ask for “third part deductions” which allows the DWP to pay part of the tenants other benefits direct to you until their arrears have been cleared. Never do this without advising the tenant first. Always be open about your actions.
- If the tenant leaves the property without notice, i.e. ‘does a midnight flit’ and you are self managing then you will need to take advice from a Landlords’ Association or a specialist landlord and tenant solicitor such as Tessa Shepperson of Landlord Law. Tessa wrote an informative series of 10 articles for Property118. If your properties are managed by a letting agent then we would of course manage the entire process for you.
- Inform the council that you believe that the tenant has left the property without proper notice. Do this in writing and obtain proof of delivery. If a tenant has left without your knowledge and you receive an overpayment claim, appeal based upon the premise that it is claimant error as they did not inform either yourself or the council that they were terminating the tenancy.
- As I have advised before you must ensure that you keep detailed notes of all communications with all parties. Where possible follow up in writing. If the tenant continues to default on their rent or top-up payments it will help you to have a record of the actions you have taken to deal with the arrears in a reasonable and professional manner.
- Ultimately you cannot help some people, so don’t worry or panic if this happens to you. Just learn from the experience and move on. It’s not personal just a part of the property investing business.