With the number of tenants in arrears on the rise, we have a look at what landlords can do when tenants stop paying the rent.
The number of tenants more than two months in arrears increased by 20% in the first quarter of 2012, according to the latest arrears tracker by Templeton LPA, part of the LSL Property Services Group. An estimated 94,000 tenants in England and Wales are in severe arrears.
These finding speak volumes about the troubles many tenants are finding themselves in, but it is landlords too who are suffering. Evicting a tenant who no longer pays the rent, broken the tenancy agreement, or damaged the property can often result in a long, arduous, and costly legal battle.
Resolving the situation by negotiating a repayment plan with the tenant sometimes works out, but there will be others who either can't or won't pay what they owe, yet refuse to leave the property. In these cases, step one in the eviction process is to issue one of two notices under the Housing Act 1988.
A landlord wishing to regain possession of a property during the fixed term (normally 6 or 12 months) of an Assured Shorthold Tenancy (AST) can serve the tenant with a Section 8 notice.
You will have grounds to do so if the tenant has failed to make payment, is consistently late with payment, or breaks the terms of the tenancy. However, if your claim is on grounds of rent arrears, the notice can only be issued after a certain amount is unpaid.
Section 21 of the 1988 Housing Act is the other notice that may be served on a tenant to regain possession of a property at the end of an AST or during a periodic tenancy. The landlord doesn't have to give a reason, but must give the tenant two months' notice.
If the tenant does not comply with either notice, the landlord will need a court order to evict. This is where the costs pile up, as on top of lawyer fees, you've still got the tenant living in the property rent-free, while you've still got to meet mortgage payments and other costs related to the property.
It has been reported by members of the National Landlords Association that bringing a tenancy to an end under these circumstances takes an average of four months, and costs £900 in court and legal fees. On top of this you have the four months lost rent, which, given that the average UK rent is £712, will effectively cost you a further £2,948.
The head of policy at the NLA, Chris Norris, says, "Unlike almost any other type of business, landlords are legally required to continue providing a service to their customers even when they stop paying for it," he explains. "Landlords are entirely reliant on the Courts Service to bring their obligations to their customer to an end should the tenant not fulfil their side of the contractual agreement."
But getting your case heard in court can be a battle in itself, with cases often being delayed for months due to things like small errors in the landlord's paperwork. Because this is so time-consuming and costly, many landlords seek out professional firms to manage the process of evicting a tenant.
Legal 4 Landlords is one such company whose offers include eviction and debt recovery. They say they receive hundreds of enquiries from landlords every day. Sim Sekhon, co-founder of the company, says, "The most common reason people call us is rent arrears," says Mr Sekhon. "Some landlords try everything else to evict a non-paying tenant before they come to us so often the tenants are £3,000 or £5,000 in arrears."
For a fixed fee of £783, Legal 4 Landlords can issue either a Section 8 or a Section 21 notice, gain a court order for the possession of the property, and send in bailiffs if the tenant still refuses to leave. This process can take up to six months or more.
The sad fact is that if you have a troublesome tenant that refuses to make rent payment and won't leave the property, it will take several months to evict, and the chances of recovering rent arrears and your legal costs are very low unless they have a guarantor, in which case your chances are higher.
If the tenant is on benefits, however, it's basically game over, as Mr Sekhon explains, "If they're on benefits it's basically a toxic debt and you have no chance of getting your arrears back. How far we suggest landlords pursue things depends on the tenant's circumstances."
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