How to deal with rent arrears
Loss of rent is a massive concern for landlords. It can affect their ability to pay their mortgage and have a devastating impact on their business.
Even if a tenant misses a payment, landlords are still legally obliged to honour their side of the tenancy agreement. However, landlords do have rights when dealing with rent arrears, as outlined below.
Housing Act 1988
The Housing Act 1988 is the rule-book containing the legal responsibilities and statuary rights of both the landlord and tenants. While it offers guidance and stipulates what conditions can be included in a tenancy agreement, it does not form a contract itself.
To set up a contract, you will need to sign a tenancy agreement with your tenant. The most common agreement is an Assured Shorthold Tenancy (AST). The tenancy agreement forms a legal contract between two parties, and normally specifies the terms of the tenancy including:
- Names of all people involved
- Length of tenancy
- Amount of rent due
- Information on rent reviews
- Tenant and landlord obligations
Be careful when determining what’s included in your agreement. If it’s in conflict with the rights contained in the Housing Act 1988, your agreement will be invalid. The rights in the Housing Act cannot be overwritten. However, this is the opportunity to lay out clear stipulations about when and how you expect to receive regular rent.
What counts as arrears?
The National Landlords Association offers helpful guidance on mitigation strategies for dealing with late or missed rental payments. This includes identifying short-term fixes and assessing tenant options. If these methods fail, you can start legal proceedings to gain possession of your property.
The specific time at which a notice can be served will depend on your rent arrangements:
- If rent is paid weekly or fortnightly, the tenant must owe at least eight weeks’ rent
- If rent is paid monthly, the tenant must owe at least two months’ rent
- If rent is paid quarterly (more common in commercial properties), at least one month’s rent must be overdue by at least a quarter
- If rent is paid annually, at least one quarter’s rent must be at least one quarter overdue.
Section 8 Possession Notice
Once it has been established that a tenant has breached the terms of their tenancy agreement (such as rent arrears), you can issue a Section 8 Possession Notice, so called as because it operates under Section 8 of the Housing Act. The notice is served by a landlord wishing to regain possession of a property during the fixed term of a tenancy.
The notice states that the landlord intends to seek possession of the property, and on what ground or grounds the possession is sought. The Housing Act 1988 lists 17 grounds on which a landlord may seek possession, including unpaid rent. The notice you give depends on which terms they’ve broken, and which grounds you are issuing the notice on, but is normally around two months.
Possession Order and Warrant of Possession
If your tenant refuses to leave on the date specified in the notice, you will need to apply to the court for a standard Possession Order. If your tenant still refuses to leave by the date given in the court order, you will need to apply for a Warrant of Possession. The court can arrange for bailiffs to then evict the tenant. The whole processes can take around six months.
Protection from Eviction Act
It is imperative that you follow the correct procedures, or you can be found guilty of harassing or illegally evicting your tenants. Changing locks without a Possession Order is a criminal offence under the Protection from Eviction Act, and is punishable by fine or imprisonment. It is recommended you seek advice when pursuing legal proceedings.
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For more information on letting your property, please contact a member of our Construction and Real Estate on 01293 227670.