Stay calm. Don’t do anything irrational.
Despite how difficult that may be, that is the single most important step when dealing with tenants that won’t pay rent.
The second step is continue reading this blog post…
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Unfortunately, this is an extremely common problem for landlords, especially in an economic climate where unemployment is rising and the general cost of living is skyrocketing. With that in mind, I’ve decided to jot down a few pointers based on my experience with tenants that have either late paying rent, or even worse, completely stopped paying rent.
If your tenant is only late with rent at this point, you might be better served reading the My Tenant’s Rent Is Late blog post. However, if that stage is a distant memory, and you’re at the pain-staking stage where your tenant has completely stopped paying rent and you’re at the end of your tether, your choices are more limited and the situation is relatively black and white, and here’s what I’ve got to say about that…
What should I do if my tenant stops paying rent?
1) Communication is key, but it’s probably gone to shit
The odds are, if your tenant has completely stopped paying rent then they’re also either ignoring all your attempts of communication, or feeding you constant bullshit excuses. Either way, you have no patience left. That’s the usual scenarios anyways.
However, on the ridiculously slim chance that you’ve sat back and failed to make any reasonable attempts of communicatiing (even though your tenant has stopped paying rent), then that’s definitely your best start point. Communication is often key to resolution! You should try to contact your tenant either by letter, a phone call, or even a visit so you can rationally and reasonably resolve the situation, which may include a payment plan. But like I said, at this stage, this is an unlikely scenario.
2) How long has it been since your tenant paid rent?
If your tenant is at least 2 months in arrears, then starting the eviction process is probably inevitable, and you probably already know that. When a tenant is two months in arrears it’s unlikely they’ll be able to catch up with payments unless they’re expecting a windfall of cash from somewhere (which is rarely ever the case). The reality is your tenant is having financial difficulties.
The word “eviction” sounds scary, and your heart may have just skipped a beat just thinking about it.
Has it really come to this?
Just being truthful.
But it’s usually not as painful or as complicated as most people make out. More about that shortly, though.
If your tenant isn’t two months in arrears, or reasonably close to it, I’m inclined to say that your tenant hasn’t completely stopped paying rent just yet, but more so “late” So once again I invite you to read the blog post geared more towards late rent payers, because at this stage you can’t technically start the eviction process, but you can start preparing for the worst, and often salvage the gut-wrenching situation.
The eviction process
When a tenant stops paying rent for a significant amount of time the landlord usually has no interest in retaining the tenant, which is totally understandable. A bad taste has been left in the landlord’s mouth; trust has been lost, and the primary goal becomes getting rid of the tenant, while recouping the lost rent takes second place (but still important).
Landlords can start the eviction process once a tenant is 2 months in arrears by serving a section 8 notice. That’s always the first step of eviction. Well, besides from signalling a warning flare to the tenant.
You don’t need to use a solicitor or a professional eviction company to serve the notice. Assuming you serve the notice properly, it will be perfectly valid and legal.
A landlord is entitled to “mandatory” possession if a tenant is 2 months in arrears. That means that a judge will give possession to the landlord if the case goes to court. But in reality, most of the times servicing a notice is enough to scare the tenant into submission, so the case will never end up on court.
Just to clarify, “submission” doesn’t usually mean the tenant will pay the owed rent, it just means they’ll vacate the property.
Recovering the owed rent
This can be tricky.
Firstly, it’s important to understand that ‘evicting a tenant’ and ‘reclaiming lost rent’ are two completely different processes. That means you will need to file two different cases if you wish to do both. From my experience, it’s easier to evict a tenant because of rent arrears than recoup rent!
The truth is, you may never recoup the money. In fact, that’s usually the likely outcome. But like I said, at this stage in the game the primary goal becomes repossessing the property, so recouping any of the money from the tenant is usually a bonus… and a hopeless dream.
This is where the law really screws landlords over, in my opinion.
Let me give you a breakdown of the most common scenario; a tenant falls 3 months in arrears, which equates to £3000. The tenant refuses to pay, so in order to recoup that money the landlord will need to file a small courts claim (which can cost a couple of hundred pounds, depending on how much you’re trying to claim for).
Once the case goes to court (which can take several months), the Judge will assess the tenant’s finances, which is when it becomes apparent that the tenant will never be able to afford the repayment. So the Judge will then formulate a realistic ‘payment plan’, which usually consists of the tenant paying back a measly £10 per month.
Yup, it’s a joke!
I’m not saying you shouldn’t chase your losses, I’m saying that your efforts may not be worth it, and you might be 10 foot under by the time the debt is paid. In these cases, I advise all landlords to value their time, and asses whether the stress and emotion is worth all the chasing.
Of course, I just gave an example a common scenario, but there are plenty of other scenarios where landlords have successfully claimed the owed rent relatively quickly. So please don’t let me discourage you. I always want justice served, so if you’re after justice, go over to the GOV website, where you can apply to a county court to claim money you’re owed.
Extra Tips for landlords dealing with rent arrears
Using Eviction Specialists
resilient much of an asshole your tenant is, the evicting process can be a lengthy and complicated ordeal, so you may it be in your best interest to pass the buck onto hired help.
My advise is to assess the complexity of the situation, and consider how valuable your time is, and then make an informed decision. I will say one thing though, using a professional eviction company may sound expensive, but most landlords are surprised by how cost-effective they can be. Also, bear in mind that they know the quickest and best route to resolving the situation.
If you have a specialist rent guarantee insurance (RGI) policy, you should get in touch with your provider and notify them of the situation.
If you have a standard Landlord Insurance Policy, it’s also worth checking to see if you’re covered rent arrears. Many basic BTL policies do cover a certain amount of arrears, and also legal fees.
If the tenant has a Guarantor, then contact them and advise them in writing and by phone that the tenant has defaulted.
They will legally be responsible for covering the tenants arrears if the tenants refuses to pay.
If you’ve had any experience with tenants that have stopped paying rent, or if you’re currently going through the ordeal, please leave a comment! Needless to say, any further tips and advice would be most welcome…
Disclaimer: I'm just a landlord blogger; I'm 100% not qualified to give legal or financial advice. I'm a doofus. Any information I share is my unqualified opinion, and should never be construed as professional legal or financial advice. You should definitely get advice from a qualified professional for any legal or financial matters. For more information, please read my full disclaimer.