One of the biggest problems for private landlords is tenants who don't pay their rent or don't pay their rent on time. Tenants falling into rent arrears can cause a real headache for landlords, particularly if you still have a mortgage on the property.
If a tenant is having difficulty keeping on top of the rent, it's important that you speak with the tenant as soon as possible and try to address the problem.
Problems with housing benefit
If a tenant is receiving housing benefit to help pay for housing costs, the arrears may not necessarily be their fault. The Housing Executive aims to process all benefit claims within 14 working days, but backlogs can occur. To speed up your tenant's claim, make sure that all the relevant paperwork has been submitted. Ask your tenant to contact the Housing Executive to find out what is causing any delay.
If there is a delay in processing a housing benefit claim, your tenant can request an interim payment. This is a stop-gap payment. If the Housing Executive decides that the tenant is not entitled to housing benefit, the tenant will have to pay back any interim payment received.
Housing benefit is paid in arrears so you will usually get the rent owed to you at the end of the month. It's important that you keep track of what has been paid to you as you will be made to pay back any overpayments. If a tenant moves out, you should inform the Housing Executive immediately so they can stop processing the benefit payment.
Housing benefit is usually paid directly to the tenant, but if your tenant is 6 weeks or more in arrears, you can ask the Housing Executive to make future payments to you.
Local housing allowance shortfalls
The amount of benefit that tenants in the private rented sector receive is calculated based on the Local Housing Allowance rules. It is very common for there to be a shortfall between the amount of benefit a tenant receives and the amount of rent they are expected to pay. This will be particularly true of any single young people aged under 35 who will normally only be entitled to the Shared Accommodation Rate of Local Housing Allowance.
In some cases, your tenant may be able to ask the Housing Executive for some additional housing benefit in the form of a Discretionary Housing Payment (DHP). These payments are short term measures and are usually awarded for a period of 6 months or less. The budget for DHPs is limited so not all applications will be successful and your tenant will have to show that s/he is in financial difficulties.
If your tenant is experiencing difficulties in meeting this rental shortfall, you could:
- suggest the tenant applies for a Discretionary Housing Payment
- negotiate a reduced rent with the tenant if you can afford to do so
- encourage the tenant to sublet part of the property or to find a more affordable place.
There is no additional assistance, other than the Discretionary Housing Payment, available to help people with rental shortfalls. You should weigh up your options if your tenant is in this position. It may be better to reduce the rent by a little each month than to lose a good tenant and face the expense of re-letting a property and having void months.
Dealing with arrears
When a tenant falls behind with rent you should write to your tenant as quickly as possible to discuss the situation. There may be a valid reason for non-payment of rent, such as
- problems at work or redundancy
- unexpected expenses, such as a funeral or
- administrative problems processing housing benefit or other benefits your tenant may be in receipt of.
Contact your tenant to find out if s/he is aware of the underpayment and find out how and when the tenant intends to make up the shortfall. If your tenant has been made redundant and is making a claim for housing benefit, s/he may be entitled to have the full monthly rent, less any service charges, paid for a period of 13 weeks if the tenant can prove that:
- s/he could afford to pay the rent when s/he moved into the property
- s/he or a member of the household has not made a claim for housing benefit in the last 52 weeks.
After this 13 week period passes, your tenant's housing benefit will be assessed under the Local Housing Allowance rules.
If your tenant acknowledges the arrears and has a valid reason for them you may want to discuss a repayment proposal. Ask your tenant how much he can afford to pay off each month or week to address the arrears. The Money Advice Service has some really useful online tools that can help your tenant work out a household budget.
If you agree a repayment plan with the tenant, make sure you keep a copy of the agreement and the tenant's consent to be bound by the agreement. It should be made clear to the tenant that defaulting on this agreement could lead to eviction.
If your tenant is in receipt of Universal Credit, you could apply for direct deductions from their benefit in order to repay the rent arrears. You can find out more on the Department for Communities website.
Evicting a tenant for non payment of rent
Although it is good practice to discuss rent arrears with your tenant, you are not under any obligation to negotiate a repayment plan. Most tenancy agreements contain a clause relating to payment of rent and a judge would have very little discretion to refuse a possession claim if you cite rent arrears as a ground for possession in your case.
If you decide to begin eviction proceedings against your tenant, you must serve a Notice to Quit in writing on the tenant. The amount of notice you must give depends on how long the tenant has lived in the property. If the tenant continues to occupy the property after the notice expires, you will have to apply to the courts for a possession order.
Recovering money owed
You are entitled to pursue your tenants for rent arrears, either through the Small Claims Court or as part of your possession claim.
You will need to have an address for your tenant to file court action. Some companies offer a tenant tracing service and you may not have to pay for the service if the company fails to locate your tenant. If your tenant provided a guarantor you can choose to take legal action against the guarantor for rent arrears or damages.
It is worth bearing in mind that a tenant in receipt of benefits may not be able to pay damages even if these are awarded to you. The amount owed may be deducted in small amounts from the tenant's weekly benefit allowance or the judgement may be unenforceable if the tenant is declared bankrupt.