As a landlord, one of the biggest concerns is rental default, especially during times of economic strain like the current cost-of-living crisis. The rise in non-payment of rent can be alarming, but there are proactive measures you can take to minimise this risk. We provide advice on what to do when tenant stops paying rent
The Importance of Tenant Referencing
Conducting thorough tenant referencing is essential, even if you feel you know the tenant personally or they come recommended by friends. A comprehensive reference process should include:
- Credit Checks: Always perform a credit check to identify any unsettled debts or financial issues that could be a red flag. Resources like Experian or ClearScore can help you access this information easily.
- Employment Verification: Confirm that your prospective tenant has a stable and sufficient income. For employed tenants, they should demonstrate that their salary is at least 30 times the monthly rent. For example, if the rent is £1,000, the annual income should exceed £30,000. If the tenant is self-employed, they need to provide proof of income through financial statements or an accountant’s confirmation.
- Landlord Reference: If your potential tenant is currently renting, ask for a landlord reference. However, be cautious—tenants with problematic histories may try to avoid this by claiming they live with family or own their previous rental. Ask for documentation, such as Land Registry title deeds, to verify ownership.
While references don’t guarantee success, they offer valuable insights into a tenant’s reliability. Trust your instincts; if something seems off, it might be best to look for another tenant.
Setting Up for Success: Payment Procedures
To further mitigate risks, consider requesting that tenants set up standing orders for their rent payments. This minimises the chances of late payments due to forgetfulness or other factors.
What to Do When Rent Isn’t Paid
If a tenant stops paying rent, the first step is to engage with them as soon as possible. Understand the reasons behind the missed payment—whether it’s a temporary setback or a more serious, ongoing issue. If it’s a short-term problem, discuss a feasible payment plan to recover the unpaid rent.
However, if the tenant remains unresponsive, it’s time to escalate your approach. Draft a formal letter outlining the outstanding amount and specify when the payment is due. Sending letters at intervals of 7, 14, and 21 days is advisable, with the final letter warning of potential legal action.
Understanding Your Insurance and Legal Rights
Check your landlord insurance to see if it includes coverage for non-payment of rent. Many landlords opt for Rent Guarantee Policies, but conditions can vary, so review your policy carefully.
As a landlord, you also have legal protections. Under the Housing Act 1988, you can serve a Section 8 notice if a tenant breaches their agreement by failing to pay rent. Furthermore, the Landlord and Tenant Act 1985 allows you to pursue unpaid rent through the courts.
If eviction becomes necessary, follow legal processes diligently to avoid unlawful eviction claims, which can result in compensation issues.
Eviction Process Overview
- Serve a Section 8 Notice: This is necessary when rent is unpaid.
- Serve a Section 21 Notice: This no-fault notice can be issued when you want your property back, provided the tenant has been there for at least four months.
- Legal Proceedings: If the tenant fails to comply with the notices, you may need to apply for a possession order through the courts.
Stay Informed
Tenant eviction laws are constantly evolving. With potential reforms on the horizon, it’s essential to stay updated. Subscribe to resources like Ello Property to keep informed about changes that may affect your rights as a landlord.
For further details on managing tenant non-payment, visit Ello Property.