Preparing for the worst: a few tips on how to avoid the impact of rent arrears
We know that, for landlords, tenants falling into rent arrears is one of the biggest concerns. It can have a massive impact on your finances if your tenants are not paying the rent, and although there are courses of action you can take to get the arrears repaid, or ultimately evict your non-paying tenants, this in itself can be costly and time consuming.
Even with a large portfolio, rent arrears in one property can quickly have an impact on your margins. Recent research from the National Landlords Association suggests that the average amount of arrears is over £1600, so we have some tips to try and avoid or mitigate an arrears situation in the first place, making eviction a last resort.
- Do your checks
Landlords should try to minimise risk at every stage of the tenancy, and that starts at the beginning. Make sure you vet potential tenants and do all of the relevant background checks, including taking up references and financial checks to ensure that they are satisfactory. If you have any concerns, consider asking for a guarantor for extra peace of mind.
- Good relationships
By building and maintaining a good relationship with your tenants, you will create goodwill that means the tenant is more likely to approach you if they are having financial problems or experiencing difficulty making their rent payments. This will give you early warning of any problems. Something as simple as a welcome note when they move in can help build a good relationship, and responding quickly to any queries or maintenance issues that they raise with you will certainly generate goodwill.
- Keep track
It sounds simple, but busy landlords may not always have time to check that rent has been paid when it should be, and before you know it, time has slipped by. Make sure you keep on top of incoming payments, and as soon as you notice that rent has not been paid, get in touch with the tenant and make a polite enquiry as to what has happened. It could even be an oversight! The sooner you understand what’s happened, the sooner it can be rectified.
- Be professional and sensitive
If you identify a potentially serious problem, you should arrange to speak with the tenant as soon as you can. Even if you’re upset or worried about your own finances, it’s very important to remain calm and professional. Keep a written record of the conversation too.
Rent arrears can occur as a result of a relationship break up or unemployment, so any intervention from the landlord needs to be handled sensitively. If it looks like a temporary blip, you could consider negotiating a repayment plan, especially if you have a good relationship with the tenant and you both want the tenancy to continue. Make sure that any changes you agree are written down and signed by both parties. If it’s a permanent change in circumstances, your tenant may prefer to end the tenancy early, which can be the best option if you both agree as it enables you to move on and find new tenants.
- Budget carefully
Even with all of the above measures, rent arrears are a fact of life for landlords. By budgeting carefully and working on the basis of rent for 10 months out of 12, you are already in a position to accommodate at least 2 months of potential arrears, so the impact on your finances will be minimal and you have some breathing space to sort out the problem.
We can offer advice and support for all aspects of rent arrears, including guarantors, repayment plans, ending a tenancy early and ultimately eviction. Give us a call on 0333 577 9050 and one of the team will be happy to chat through your options.
