Minimising the risk of lost rent.
As a landlord you may have factored in vacant tenancy periods when undertaking your financial forecasting, but what about when tenancy agreements don’t quite go to plan and the unexpected leaves you financially exposed? How do you manage the situation and what are your options?
Failure to pay rent.
There are many reasons why a tenant may not be able to pay rent. As a one-off it may be that a simple error has occurred with payment processing and this should be easy to resolve. However, there may be a larger underlying cause such as a change in personal circumstances. For instance, a work redundancy or a relationship breakdown, either of which could have big implications on your tenant’s ability to pay rent. If this situation arises, providing information to your tenant as quickly as possible may allow a better solution for both parties than simply beginning the process of eviction.
Keeping an open dialogue with your tenants and giving them access to information is key. For example, following a change of circumstance they may be eligible to claim housing benefits, so offering information on the application process is prudent. Adding a guarantor onto the tenancy agreement so that once any current rental arrears are resolved you are protected and the tenant has additional financial backup is another possible solution. When going down this route however, all parties need to be clear about what exactly this involves and for how long any arrangements stand. The guarantor themselves must understand the financial obligations if the tenant doesn’t pay rent in full and on time and it is easier to have someone as a guarantor who is based in the same country as which the tenant is residing.
If these avenues have not resolved the issue, what can you do next?
If the tenant is in breach of their contract you may be able to begin proceedings to end the tenancy agreement and find someone more suitable for your property. If you have engaged the services of a reputable lettings agency, such as Robert Oulsnam and Company, and have a managed service package with them they will be able to guide you through the complex and ever changing legislation regarding repossessing and claiming back any unpaid rent. They will also issue any notices and provide the right information, at the right points, to ensure you can legally proceed.* If you don’t use a managed service you can find information on the changes to section 8 notices as well as information regarding section 21 notices at: https://www.gov.uk/browse/housing-local-services/landlords.
What else can I do.
Understanding your rights as a landlord, and being confident in your approach to dealing with any potential situations, will make managing them much less daunting. Consider also taking out additional rent protection insurance, such as “The Plus Service” because, depending on the policy, you may be covered for up to 12 months’ rent, help with legal costs associated with possessing your property and other potential costs that may arise. Given that 9.3%** of tenants in the UK are in some level of rent arrears, it is a big area of concern for landlords and potentially a very costly area. If you do take out a policy make sure you understand exactly what the policy covers, the duration of the cover, the details of any excess, and you will have the additional peace of mind that should something unforeseen happen, you have mitigated as much of the financial risk as possible.
*These services are included in our Silver and Gold packages.
**Figures published by Your Move.