What to Do if Your Tenant Stops Paying Rent?
A tenant that suddenly stops paying rent is never something that any landlord wants to experience. So in this blog, we cover the best steps to take if one of your tenants stops paying rent as well as the best steps to take to both find a solution and to prevent you losing out on receiving your rent.
Of all the potential headaches you have to deal with as a landlord, non-payment of rent surely takes the crown of being the most worrying as well as having the biggest financial impact.
It’s not just a headache you’re at risk of. If a tenant stops paying rent, it could prevent you from meeting your mortgage payments and potentially putting you into arrears yourself. Then there’s no telling what could happen... one minute you’re enjoying a Sunday roast at the village pub, the next you’re peeing in a bucket in a Bangkok prison. Maybe that’s a tad dramatic.
Nonetheless, non-payment of rent is stressful as it gets, so let’s take a look at how you can quickly and effectively resolve the situation.
Talk to your tenant
When the payment date comes and goes, don’t hang on assuming they’ll get round to it.
There might be a viable short-term issue which has prevented them from paying the rent on time, which is fine, just as long as you know about it. Try to remain calm, polite and courteous - this is probably as stressful for the tenant as it is for you.
You may want to work with them to find a solution, such as pointing them in the direction of housing benefits, universal credit or professional debt advice. Usually, they’ll promise a date in due course when they can pay the month’s rent - up to you to decide if it’s a reasonable time to wait. During the pandemic, the landlords and agents who worked out a payment plan with their tenants were the ones who suffered minimal arrears issues.
You’ll know whether or not they have been a good tenant in the past. If yes, then it’s probably worth giving them the leeway they need. If not, it might be time to take the next steps.
Send a formal demand
If your tenant isn’t playing ball or is straight up ignoring you, you should send them a written letter formally demanding payment of outstanding arrears, and that all future payments be made on the due date. You should also explain that unpaid arrears could result in court action being taken against the tenant.
The letter should be worded professionally and ideally sent via hand-delivered mail as well as electronically. Keep a copy of the letter for your own records.
If the rent still hasn’t been paid 14 days after it is due, send them another letter explaining that you will soon have no choice but to seek possession of your property.
Write to the Guarantor
After the 14 days have passed, you should also write to the tenant’s guarantor, if they have one. This letter should advise them that the tenant hasn’t paid rent according to the tenancy agreement and that further action will be taken if the rent continues to go unpaid.
At this point, the guarantor will hopefully step in and save the day. If not…
Send your Final Warning Letter
If after 21 days the rent hasn’t been paid by either the tenant or the guarantor, you should send another letter confirming your intention to take legal action if the rent isn’t paid. If you previously sent a letter to the guarantor, you should send them another letter explaining the rent still hasn’t been paid by the tenant.
When the rent becomes a month overdue, and the next month is now due, the tenant is considered to be two months in arrears. Now we’re finally done sending letters; you have the right to take legal action and reclaim your property.
It may seem a longwinded process sending numerous letters to you tenant. However, a proper, reasonable audit trail is necessary if the courts do get involved down the line.
Claim Possession of your Property
Under the Housing Act 1988, there are two ways you can go about seeking possession of your property: either with a section 8 or a section 21.
Section 8
As the tenant has failed to pay their rent, they have broken the terms of the tenancy agreement, and therefore you are at liberty to serve them a Section 8 notice at any point in the tenancy. There’s a chance your tenant will dispute this notice, so make sure you’re armed with sufficient evidence of unpaid rent and the efforts you took to resolve the issue - your audit trail of letters and emails.
By taking this route, you can also make a claim against your tenant for arrears. Things are now getting a little messy. Again, make sure you have plenty of evidence, or a judge will likely rule against you.
Section 21
Good old Section 21, will, for the time being anyway.
This technically isn’t an eviction, so you don’t need to provide evidence of unpaid rent or anything like that. You are simply giving notice to your tenant that you are regaining possession of the property.
The only catch is that you can’t do this during a fixed-term tenancy - you must wait until the fixed term has ended. As soon as it does, the tenancy becomes a periodic tenancy with no fixed end date and you’re good to serve the Section 21 notice.
There are several documents that must be served at the start of a tenancy to ensure that the Section 21 notice is legal. We advise that the following documents are served to the tenant - items in red are essential for the Section 21:
Tenancy Agreement - a written or digital document that sets out the legal terms and conditions of the tenancy signed by both parties.
How to Rent Guide - a Government document that contains important advice for tenants in England and Wales. The guide details what a tenant should expect from the tenancy and what both the tenants and landlords legal obligations are.
Deposit Prescribed Information - Within 30 days of receiving the tenancy deposit, landlords must register the deposit and provide their tenants with deposit prescribed information. This includes; details of the deposit amount, the address of the property, contact details of the tenancy deposit scheme administrator and the name, address and contact details of the landlord and tenants. With a custodial deposit protection scheme, the Custodial Terms and Conditions must also be included in the prescribed information.
Energy Performance Certificate (EPC) - a document that displays a property's energy efficiency.
Electrical Installation Condition Report (EICR) - this assesses the condition of the electrical systems in a rental property and evaluates how efficiently they work. It ensures the electrics are safe enough for prospective tenants to use and identifies any hazards that need fixing.
Gas Safety Certificate - a full inspection report of a rental property's gas fittings and appliances. This is carried out to ensure there are no safety risks to tenants.
Property Inventory - a document that provides an in-depth report of the property's contents and condition. Although property inventories are not a legal requirement for landlords, they are highly recommended. Having a complete record of the condition is extremely useful during deposit disputes.
Are you covered for unpaid rent?
Remember that there is specific landlord Rent Guarantee insurance available to specifically cover you for loss of rent. If you choose not to pursue a claim of arrears in court, this would be a way of ensuring your rental income is protected (please see our website for further details or click HERE)
Good luck. Let’s hope you only have to go through this once! We’re here for you if you need any further advice on 01332 300197