While being a landlord provides a fantastic investment opportunity, it is not a perfect route to financial stability, though this is true of most investment opportunities. That said, with the increasing number of taxes and regulations being put into force, it can sometimes feel like being a landlord is more stress than it’s worth. This is especially true when it comes to rent arrears; when a tenant doesn’t pay their rent, it can have a negative effect on a landlord that can be difficult to come back from.
The Residential Landlord Association (RLA) noted in their Landlord Finance, Investment & Tax Report 2016, that 28% of landlords had some experience with rent arrears during the year.
However, getting rent arrears from a tenant doesn’t have to be a stressful experience, as you will learn by following these simple tips.
When a tenant fails to pay their rent, it can cause a negative financial rippling effect, especially for the landlord who, more often than not, have mortgage payments to make in addition to paying insurance premiums, and funding general maintenance costs for their properties. There are a few things you can do to reduce the chance you’ll experience tenants who do not pay rent.
First, it is important to have a robust tenant referencing practice in place. At the bare minimum, this should involve getting a credit history check on the tenant to allow you to be confident in the tenant’s ability to pay their rent.
If for some reason a tenant does miss their rent payment, it’s important to contact them swiftly. This contact should be friendly and informal, but should be done once the missed payment is noticed. This will allow a tenant to explain why the payment was late, but will also let them know that you’re on the ball when it comes to rent payments.
While going to court may seem like an appropriate response, this should be a last resort. Give your tenants plenty of opportunities to rectify the arrears. This could be done by arranging a payment plan, contacting a guarantor if one has been stipulated, or even by requesting that any housing benefits be paid directly to you. At this step, regular official contact should be recorded, and it may be worth warning the tenant of potential of court action if payment isn’t made in a timely manner.
If the situation remains unrectified, it is worth considering regaining possession of the property. By using a Section 21 for accelerated possession, you can speed up the process of getting new, paying tenants into the property, though this can only be served if a tenant’s fixed term is over. If a fixed term is still in place and the tenant owes more than 2 months’ rent arrears, then a Section 8 can be served.
If the worst should happen, and you served a Section 8, then you have the option to claim arrears in a small claims court. However, if you take a tenant to court in any other circumstances, this procedure will be costly and time-consuming, and won’t guarantee you’ll get your money back.
As Cardiff’s largest lettings agency, at CPS Homes, we offer Rent Guarantee for landlords who take advantage of our Fully Managed Service. Rent Guarantee is a form of insurance that protects landlords against the loss of rent, especially when a tenant absconds the property with no intention of paying back rent.
Insurers will ask tenants be professionally credit checked, a service we provide as standard for our landlords.
The cost of our Rent Guarantee service is a 50% letting fee and 12% management fee, though terms and conditions do apply.
If you’re a landlord who has suffered from rent arrears, you might consider allowing us to take the stress off you. We offer a range of property management services that can help every landlord no matter how much input they have in the running of their buy-to-let property. For more information, contact us on: firstname.lastname@example.org, or pop into our branch in Cathays.