Although the proportion of tenants in arrears has fallen over the past few months, standing at 8.7% in September, it was averaging around 13% over the summer months, according to data from Your Move. So if you haven’t already experienced a tenant making late payments or falling behind with their rent, you almost certainly will at some point, especially if you have more than one buy to let.
There could be a simple explanation for your tenant not paying their rent on time. There may have been a bank error, a payroll issue at their employer’s end, or they might have just forgotten – and all of these can be quickly and easily remedied.
But what if it’s something more serious? A tenant persistently not paying can be very bad news for landlords, particularly if you haven’t got a lot of savings and are relying on the rent. Not only has that income disappeared, meaning you’ve got to cover the mortgage and other property bills yourself, but it could take several months to evict the tenant, during which time you’ll rack up even more costs – especially if they push the process to the limit and you need to instruct a bailiff to get rid of them. Reeds Rains estimates that the cost of 3 months’ rent arrears and an eviction could reach around £5,000!
In some cases, tenants will manage to make up what they owe and you’ll be happy to let them stay, but the majority of the time, non-payment means one of two things: either they can no longer afford the rent or they’re deliberately choosing not to pay you. And in both those cases, you need to ask them to leave.
You can do this by issuing a Section 8 Notice when they owe more than 8 weeks’ rent for weekly or fortnightly payments, or more than 2 months’ rent for monthly payments.
Here are five top tips on how to protect your finances against the impact of rent arrears:
- Reference your tenant thoroughly. Ask for 3 months’ bank statements so you can see their income and expenditure patterns and judge whether they can afford your rent. Speak to their last landlord or agent to find out whether they had any problems with payments.
- Check your bank on the day rent is due. The sooner you notice late payments, the sooner you can take action.
- Communicate with your tenant or agent right away if rent is late. If it’s a temporary problem, put a payment plan together in writing to make sure the rent’s made up as soon as possible.
- If in doubt, get the tenant out! You might sympathise with a tenant’s financial difficulties, but you’re running a business, not a charity! If they can’t afford to stay or you believe they’re deliberately withholding payment, issue them with a Section 8 notice to leave as soon as possible. Delays will cost you time and money.
- Take out rent guarantee insurance. There are lots of rent guarantee insurance products out there, which will cover you for up to 12 months’ missed rent and usually include legal costs for evicting the tenant. If you use one of the larger letting agencies, such as Your Move, they may have their own.
If you need advice and help evicting a tenant, contact Landlord Action.