Dealing With Rent Arrears

It is every landlord’s nightmare to have tenants who persistently fail to pay their rent. After all, letting property is (in most cases) a business, and if you have no income you are in trouble. However, many landlords, at one time or another, find themselves in this situation.

The best way to deal with rent arrears is, of course, to try to ensure that they never happen.

And the best way to do this is to be very, very careful about the tenants you let into a property. Try to keep out bad tenants by always carrying out careful checks. All tenants should be asked to fill in a tenants information form and references should always be followed up.

There are two procedures you can use for dealing with non-payment of rent via the courts: applying for a possession order, or applying for a County Court Judgement (“CCJ”). Also, of course, just simply threatening either of these will often resolve the problem. For possession proceedings you will need to first serve the relevant notice, correctly drafted. For CCJs you will need to send the tenant a ‘letter before action’ (referred to sometimes as an “LBA”) which is a letter telling them that if they do not pay the debt due within a specified period (usually 7 or 14 days) you will be taking them to court.

Proceedings for a CCJ

Provided the tenant does not have any potential claim against you (for example, because the property is in poor repair) you should have no trouble in getting the CCJ. The problems usually start because the tenant still fails to pay the judgement and you have to enforce it through the courts. Probably the most reliable enforcement procedure is the ‘attachment of earnings’ order where the court orders the employer to pay over part of the tenant’s wages to you every month. However, an unsatisfied CCJ is not a complete waste of time. Your tenant will find it difficult to get credit if he has an entry on the Register of County Court Judgments, and many tenants will pay a debt to prevent this happening, if court proceedings are threatened.

Possession Proceedings

There are two types of possession procedure. The (so called) ‘accelerated’ possession procedure and the ‘normal’ fixed date proceedings. The accelerated possession proceedings can only be used for assured shorthold tenancies where you have served a Section 21 notice, and you cannot claim for rent arrears in the proceedings. However, there is no reason why you should not also apply for a CCJ at the same time.

The fixed date procedure is more complex and will involve a court hearing where you will have to give evidence of the rent arrears due. Unless serious rent arrears accrue at the start of a long fixed term, it is often simpler and sometimes quicker to use the accelerated possession procedure, even though the Section 21 notice period is two months. (Note: it is assumed in this article that tenants have assured shorthold tenancies.) Some practical examples of rent arrears problems and suggestions on how to deal with them:

The tenant is a feckless individual who feels that he is entitled as of right to be housed free of charge by his landlord.
The tenant has lost his job.
The tenant having separated from her partner (in these circumstances it is usually the female) remains in the property with the children and no job, and wants to be re-housed by the Local Authority.
The tenant is in receipt of housing benefit and persistently fails to pay the shortfall.
Rent arrears which accrued while housing benefit was being applied for have not been paid.

The Feckless Tenant

This is the archetypal bad tenant which every landlord dreads. However, they can usually be weeded out at the start by careful checking, and often (with experienced landlords) by ‘gut feeling’.

If one of these tenants does slip through the net and ends up in your property, you will have a problem. With the worst examples, they are never going to pay, and eviction is the only answer. A Section 21 notice (and/or if the rent arrears have reached two months, a Section 8 notice based on the serious rent arrears ground) should be served as soon as possible.

Note: it is because a new tenant might turn out to be less than satisfactory and need evicting that tenancies should never (for new tenants) be longer than six months.

Often the worst tenants are very good at appealing to a landlord’s better nature, promising faithfully to pay but never actually doing so or always slipping back into arrears. Landlords should however harden their hearts and issue proceedings if promises are broken more than once or twice, unless you are prepared to consider that property as a charity and accept that you are never going to make a profit from it.

Sometimes, however, this type of tenant actually wants to stay in the property, and will bow to pressure and pay if pushed.

With these tenants a landlord has to decide whether he is prepared to put up with the hassle of chasing the tenant on a regular basis and bringing the occasional county court action, or whether he is just going to evict him.

Action of some sort however should be taken.

Lost Job

Often there are problems when tenants lose their jobs, if there is a delay in finding new employment. Responsible tenants will speak to you about it before the arrears accrue and reach agreement with you. However, others will just bury their heads in the sand and allow the arrears to build up. If the tenant does then find employment and the arrears persist, you should consider bringing proceedings for a CCJ and, if he still fails to pay, applying for an attachment of earnings order.

If the tenant fails to find a job, he will almost certainly be eligible for Housing Benefit, and should be encouraged to apply. However, in many parts of the country there are very serious delays in benefit being paid, during which large arrears will build up. Ideally, you will want the benefit to be paid direct to you, particularly if a large sum is due (i.e. because of the arrears) as it is sometimes difficult for tenants to resist spending this on other debts. Ideally, your tenant should ask the Benefit Office to pay the rent to you direct. If they do not, note that the Benefit Office will pay benefit direct to you if the arrears have reached eight weeks or more, if you ask them. Make sure you do this!

Alternatively, you can use these arrears to evict the tenant under the serious rent arrears ground, if you no longer want him as a tenant, and provided they have not been paid by the date of the hearing. Alternatively, in serious cases, proceedings for possession can be brought in an attempt to force the Benefit Office to deal with your tenant’s application. It has been known for the Benefit Office to be joined into the proceedings by the Judge and summonsed to Court to explain the delay.

Abandoned Partner With Children Wanting To Be Re-Housed

In this situation it is important that proceedings for possession are started as soon as possible, assuming that you want her to go. You are not doing the tenant a favour by letting her stay, as she will normally not be re-housed until you have a court possession order.

Failure To Pay Housing Benefit Shortfall

Here you can either issue proceedings for a CCJ or decide that you no longer want this tenant and bring proceedings for possession. If the sum due is small and the tenant is otherwise a good tenant (i.e. looks after the property well and gets on okay with neighbours) it will probably be less hassle letting him stay, as eviction proceedings and finding a new tenant will be more troublesome and expensive. You can either write off the shortfall (which, if it is small, may make for a better landlord/tenant relationship) or periodically apply for a CCJ.

Failure To Pay Arrears Accrued While Waiting For Benefit

As your tenant is now in receipt of benefit and rent is being paid, you will normally not want to evict him, unless he is unsatisfactory in some other way. Try to agree an installment payment programme with the tenant, bearing in mind that as he is on benefit he will not be able to afford much. However, if this is not paid, consider applying for a CCJ. If the tenant later gets a job, remember that you will be able to apply for an attachment of earnings order.

And finally … do deal with problems quickly. As soon as rent falls into arrears, send a letter asking for an explanation and follow this up (if no response is received) with either a LBA or a possession notice. It is when rent arrears are not addressed at the start that the worst problems are caused and arrears build up, often to such an extent that it is impossible for the tenant ever to pay them. You are legally entitled to your rent. Make sure you get it!

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