Every landlord, at one point or another, worries whether their tenant is going to be able to keep paying their rent. Your tenants’ financial concerns become your financial concerns. Many tenants just don’t realise that landlords have regular expenses too that rely on their rent money – mortgage, bills, council tax… Late rent can sometimes disrupt the landlord’s own payments. This can leave many landlords feeling vulnerable. All landlords need to know the plan of action, should a tenant stop paying rent.
1) Keep a record of all rent payments
As a landlord, you should always keep a record of all rent payments you receive for each tenant and each property. This will enable you to see what date payment is expected, and which dates your tenant pays the rent. Tenants may sometimes pay a couple days in advance or a couple days late. Though ideally, you want to make it clear that the rent should be received on the exact date that it is required each month, with more casual tenancies you may find that this isn’t always the case and, depending on the relationship you have with your tenant, you may just accept it in good faith.
If the matter gets taken to court and you are applying for repossession of the property, a copy of all payment records is required.
2) Contact your tenant to inform them that the rent is due
If it has been several days since the rent was due, you need to contact the tenant informing them that the rent is unpaid. It may just be a slip up, where your tenant doesn’t realise for whatever reason that the rent has yet to be paid. Perhaps the payment bounced, or they simply forgot, and are able to pay it immediately in full. You may even give them a casual call to begin with just after a couple of days of the rent being late, just to ensure that there wasn’t a simple mistake. Ask them if they’re having trouble paying it and when you can expect it. Ideally, you want to nip this in the bud early. And if the tenant is struggling financially, contacting them in this way will help to remind them that rent payment should be a priority when paying bills. Otherwise, the tenant may pay someone else who is demanding money owed, just because they’re the first (or most frequent) to contact them.
Though calling your tenant frequently to follow up on the situation is recommended, written contact is always a good idea as it is evidence of your communications. (Just make sure to keep a copy.) Within the letter, state which date the payment is due and the date in which you are writing, summarise any telephone conversations and request that the outstanding amount is paid immediately or by your specific request date. It may also be worth noting that failing to pay their rent may result in you taking further legal action against them.
3) Contact the guarantor
If your tenant still hasn’t paid the rent after you have sent them a formal demand and they have a guarantor listed, then you will next need to contact the guarantor and inform them of the situation. If a guarantor was listed in the tenancy agreement, then it their legal responsibility to guarantee the rent when your tenant is unable to. Send a copy of this letter to your tenant.
If the tenant doesn’t have a guarantor, then send them a second letter once the rent is outstanding by at least 14 days. State that you will seek repossession of the property if the tenant doesn’t contact you or pay you immediately.
4) Final warnings and Section 8 Notice
If it has been at least 21 days since the rent is due, send a final warning to your tenant and the tenant’s guarantor if they have one. Inform them both that the rent is still unpaid, and you will now begin to take legal action to reclaim the property unless payment is received in full immediately.
Once a full month has passed and the tenant has fallen two months into arrears, you have the right to formally serve a section 8 notice under the Housing Act 1988, demanding payment within the next 14 days or the tenant will be taken to court. You can also seek the outstanding rent payment from the benefit office if your tenant is in receipt of benefits.
5) Legal action
If the two months of rent has still not been paid, you should now seek legal advice for taking your tenant to court for the rent amount owed, and regaining possession of the property through the court. The court will give your tenant a date to remove themselves from the property, or else the bailiffs will remove them.
If you have Rent Guarantee Insurance, you can contact your insurance company to make a claim. Rent Guarantee Insurance can cover the legal expenses if your tenant is struggling financially.