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Property Hawk

Dealing with Rental Arrears

Severe rental arrears fell by almost 16 per cent in the fourth quarter of 2012 according to data from LSL Property Services. Reporting 16,000 fewer tenants who were more than two months behind with their rent than in the previous quarter.
This improvement marks a turning point in what had been an upward trend in severe arrears. Which are now lower than at any time since the end of 2011, with just 2.2 per cent of tenancies in serious arrears.
This is good news for landlords. But the problem still remains. So what should a landlord do if they are faced with serious rental arrears.



Landlords should take decisive action with a section 21 notice

The initial approach from any landlord should be to prevent serious rental arrears from accumulating in the first place. This can be helped in the way they manage the tenancy. As soon as a tenant misses a rental payment a landlord should act by issuing a section 21 notice.
This will help give a landlord the whip hand in obtaining possession should the situation deteriorate further, with more missed rental payments.  Some landlords prefer to be more pro-active and issue a section 21 notice just after they have created a tenancy agreement.

Rent guarantee insurance

Another way of guarding against rental arrears is to take out rent guarantee insurance.

 I know Alan Boswell Insurance will provide legal expense insurance for about £25 per property and for a little more, cover the lost rent  a landlord is due, whilst they obtain possession.  It is worth noting that whilst serious rental arrears are taking a downward move the number of possession orders were up by 5.5 per cent in the third quarter of 2012.



Should I be understanding?

Many landlords hope to build up a rapport with their tenants, which is good.  After all landlord and tenant should be working together to make the tenancy work.  I know that the likes of the Guardian may find it hard to believe, but ‘shock horror,’ some landlords even quite like their tenants.  Most of us have been tenants ourselves at one time, and many of us have kids who are now renting.  There is a danger however that landlords empathise too much with their tenants. By not wanting to appear to be taking a heavy handed approach, they end up avoiding tackling the problem at all.  This means that rather than taking preventative action, as I mentioned above; they allow their tenants to make reduced, or intermittent rental payments, in the hope that their financial situation improves.  Unfortunately, very often it doesn’t.  Then both the tenant and the landlord are left in a more and more difficult situation.  The tenant can’t afford their arrears, and the landlord can’t afford to let go of the idea that they will get their unpaid rent back.  Any good landlord will try and work with the tenant to try and bring the rental account up to date, by taking a reduced rent in the odd month, whilst agreeing to additional payments at a later date (a payment plan).  This should never be done at the expense of decisive action.  Landlords should never confuse being understanding, with becoming an 'ostrich', and ignoring the potential threat to their rental business caused by rental arrears.

Any comments on rental arrears please post them below or if you have a legal question on rental arrears please post it to our Landlord Legal Forum.



Comments (13)

Rental arrears
Just to inform you that a section 21 by law can not be issud IF you have taken a bond regards ken
#1 - Ken - 01/25/2013 - 13:52
Ken
I don't understand what you mean Ken, why can't Section 21 notice be issued if you've taken a bond. The two as far as I know aren't linked.
#2 - Jack - 01/25/2013 - 14:27
Rental arrears
Section 21 can be issued as long as you have used one of the statutory deposit protection schemes. If you have not, you cannot. The forms for possession from the County Court ask for this when you fill them in.
#3 - Gary - 01/25/2013 - 16:48
Rental arrears
What if have not taken a deposit, therefore no need to protect it. Can I still issue a section 21
#4 - George - 01/25/2013 - 17:27
rental arrears
If a money deposit was received on or after 6 April 2007 and still in place at the time the section 21 was issued, then you must provide the reference number for the tenancy deposit scheme used and basically all the requirements of the TDS had been complied with. So you can use a section 21 , but you need to have used a deposit scheme if you have taken cash deposit.
#5 - Sue - 01/25/2013 - 19:40
rental arrears
That is correct Sue. Though a section 21 and a deposit are not related, when applying for a court order to regain possession of a property you will be required to prove that you have complied with deposit legislation.
#6 - RKResidentialLettings - 01/25/2013 - 22:12
Section 21/Bonds, etc
Some half correct comments here, some slight confusions. The facts: you CAN issue a Section 21 Notice if you have taken a bond (sorry, Ken, you are mistaken). You MUST at the outset issue both the certicate of registration, AND the Prescribed Information sheets. these latter items are OFTEN forgotten, in the incorrect assumption that having properly registered the deposit you have done the right thing; you have, but only half of it. The Localism Act that became law in 2011 changed the previously lax rules, and if you fail to issue the Prescribed Infomation at the time of signing the lease, AND get it signed by the tenant at that time for safety's sake, you will have breached the rules - this can lead to fines of up to three times the deposit.
Sue is correct but the implication in there is that you need to fill in the Sec 21 with the certificate details: you do not, you just have to have made sure you followed the process properly at the outset, i.e. as RK say, you will be expected to provide all this info to the Court when you seek to enforce the Section 21 Notice once it has reached the point of going to Court. Don't bother going to Court if you have not got this - you will fail and be back to square one.
#7 - Andy McG - 01/26/2013 - 14:05
rent arrears
we have lodged a claim for unpaid rental arrears in the small claims court, our tenants are due to repay half of what they owe????? however despite paying for bailiffs we have to date received nothing apart from the notice of intent of these tenants to seek an IVA, even though their monthly income which includes numerous benefits, is nearly £4000 pcm. What is the point of all this action if the outcome still favours the tenants. NB, they have to repay housing benefit they have fraudulently claimed, we provided them with a home, and we are £5000 out of pocket.
#8 - keith croft - 01/31/2013 - 15:55
rent
please can some one help,its my first time as a landlord and my tenant has stopped paying,she owes me 3 months rent and she wont get intouch tried everything!!can someone tell me the procedure to rmove this tenant i have no deposit as the company that found the tenant didnt put it in a dps but spent it and has closed
#9 - john needham - 02/02/2013 - 21:44
Rental arrears - legal advice
For FREE legal advice on rental arrears register on our forum and post your question there.
#10 - CHRIS HORNE - 02/13/2013 - 03:33
Rental arrears - legal advice
For FREE legal advice on rental arrears register on our forum and post your question there.
#11 - CHRIS HORNE - 02/13/2013 - 03:39
rent
hi i have a tenant who ows 10000 pounds can you tell me is there any thing i can do or the nexed step many thanks
#12 - wes hall - 02/25/2013 - 11:29
Bad tenants
The legal process of removing bad tenants is, as always, biased in favour of the tenant and takes a long time to execute, by which time it will have cost you thousands more in lost rent and could cause you very bad hardship if you're struggling to support your own family whilst another is living off of you rent-free.

To speed things up, simply enter the property when the bad tenant is out, remove all belongings of the thieving tenant and change the locks. If they are sponging scroungers who are rarely out working, go round with some heavies and forcibly remove them.

I have some Albanian contacts who will happily do this for a small fee and you will get back your property in no time at all.

Street justice it may be, but when the law fails so badly to work in the right way, there is little choice.
#13 - Sako the Skull - 05/12/2013 - 13:35
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