Unfortunately, there are many circumstances that can lead to a tenant falling behind on their rent. Landlords will understand that this is a natural part of the letting business but there are no reasons why rent arrears should result in loss of homes and loss of income, open and honest communication from both parties is key.
This guidance is aimed at ensuring landlords, agents and tenants have a clear agenda for which to reach an agreement over rent arrears, where they might have accrued.
To prevent and reduce the risk of rent arrears occurring or amounting in a tenancy, early and appropriate intervention is key. Most tenants pay their full rent on time however this can change at any time due to the tenant’s circumstances, such as job losses, children reaching a non-dependant age, struggling with debt etc.
Rent arrears are priority debts and occur when tenants fail to pay all or part of their rent; dealing with rent arrears can be tough but it is important to address the issue as quickly as possible, before the situation worsens. It can be a challenging time for renters when they are on a low income or are dependent on benefits and face financial insecurity.
Communication is the key; we understand that naturally tenants may be apprehensive about contacting their landlord when it comes to worries about not being able to pay their rent as they fear of losing their home. Likewise, landlords can often think they are ‘doing their tenants a favour’ by not following up on missed or incomplete rent payments.
However, ignoring the situation and doing nothing can create more problems in the long run for both Landlords and tenants. By starting a conversation with the landlord, the tenant can potentially relieve the stress of financial worries and start to access financial support and assistance, depending on the landlord’s own circumstances, they may be able to offer some support and options on rent repayments.
Early intervention is always best as gaining possession of the property can be costly and time consuming and landlords may not always get the outcome they hope for. By proactively engaging with tenants, the landlord can not only help to reduce the tenant’s money worries, but also ensure both parties are committed to working together to ensure any arrears are managed afterwards, allowing the tenancy to continue.
Keeping it in writing
Good record keeping will not only help you detect problems early on but will keep both parties on track when entering negotiations.
Both landlords and tenants should be responsible for keeping records of all communication, rent payments and anything discussed and agreed with one another.
This ensures that the tenant understands what has been agreed and the landlord can evidence the steps they have taken to help the tenant manage their arrears should there be a need for mediation or court action in the future.
Always make sure that;
- Ensure your records are accurate and up to date.
- Always issue receipts (if cash is paid) and keep a copy for your own records.
- Landlords are legally obliged to provide a rent book if the rent is stated to be paid weekly. It is recommended that a rent book be provided for every tenancy and that it is kept up to date. It can be used as a record of payments and to resolve any dispute.
- Verify housing benefit or universal credit payments received direct from the Council or Department of work and pensions (DWP) with the tenants rent book if any.
- Keep an up to date rent schedule of the rent due, paid and outstanding. Share this with your tenant so they know exactly what amount of arrears is still owed.
- Where the tenant’s preferred communication method is via phone the landlord should ensure they are sending a follow up letter, email or text outlining exactly what was discussed. If the tenant disagrees with this, they can communicate it back to the landlord within a reasonable time frame.
- If you agree to vary the written terms of the tenancy issue a written confirmation to the tenant and keep a copy of the property file.
Once the landlord and tenant are communicating there are several things that should be done in order to help sustain the tenancy.
- The tenant should prepare a budget plan and share this with the landlord; this should show how much is available in the tenant’s budget after essential living costs have been met.
- If the tenant has experienced a reduction in their income they should check to see if they are entitled to any additional help via benefits. They should advise the landlord if they are doing this and any delays in payment caused by their claim being processed.
- When negotiating repayment agreements, Landlords should offer tenants the option of lump sums, instalments or a combination of the two.
- Landlords should advise the tenant to seek independent advice and support, especially if they have general debt problems.
Once a budget has been prepared, the tenant has the support needed and the landlord understands the situation both parties will be able to discuss a sensible repayment plan going forward allowing the tenant to pay back what they can afford in a reasonable time frame for both parties. This repayment plan should detail the amount to be paid each week or month and ideally be signed by both the landlord and tenant to show they have agreed to the plan. Sustaining the tenancy long term should be the goal of these repayment arrangements for both parties. If both landlord and tenant stick to a sustainable long-term plan to pay back the arrears, the landlord can recoup some of the lost income and there is no need for tenancies to come to an end.
Tenants in receipt of benefits
Tenants on a low income can often claim for help with their housing costs. If a tenant is already on benefits and the payment has stopped it is important to understand why the payment has stopped, has there been a change in circumstances? Is the benefit being reassessed? Likewise, if the amount paid is reduced this could be as a result of a change in the tenants entitlement and they might need to reassess how they will meet the full rent.
*Landlord, you can find a UC47 for at - https://directpayment.universal-credit.service.gov.uk/
Other options for recovering rent arrears
Did the tenant provide a guarantor? If a tenant has a guarantor in place, landlords could contact them to discuss recovery of the rent arrears.
Did the tenant provide a deposit? If the arrears are the same amount or less than the deposit taken the landlord may agree that at the end of the tenancy any rent arrears will be taken from the deposit; however, if this is the case then landlords should be aware that the deposit will not be available to cover any damage caused to the property.
Whilst this guide is based on the principle that tenants and landlords working together constructively achieves a sensible arrangement for repaying any arrears, there will be times where an agreement cannot be reached and the relationship between tenants and landlords may not break down. In these cases, it may be worth considering a mediation service. In Newcastle you can contact the Private Rented Service who can work together with landlords and tenants to offer advice and support.
Download your full version of A guide for managing rent arrears here.