When tenants don't pay

So, your tenant has failed to pay their rent. What can you do? It's a frustrating situation to be in as a landlord; you have your own overhead costs and financial commitments to deal with, after all. There is no substitute for professional legal advice, of course, but here is a brief overview of what to consider if your tenant stops paying rent.
Your rights as a landlord
As a landlord, you have the basic right to charge rent and to receive rental payments when they are due. You also have the right to receive proper notice to end the tenancy if and when your tenant decides to move out. In addition, your tenancy agreement may outline additional rights and responsibilities to you or your tenants. Having a legally sound tenancy agreement is a must, as it could save you significant time and money in the future. Furthermore, you have the right to check your potential or existing tenant's rental history; this will give you information about their previous landlord, along with details of any problems the tenant had paying rent or any damage to property they may have caused.
If it seems like you'll have issues with your tenants, you may want to check that your landlord insurance covers you for any problems that may arise. Consider extending your existing policy to include cover for loss of rent, and check that you're covered for any property damage.
Identifying and investigating the failed payment
If possible, it's best to convince your tenant to pay their rent by standing order so you can give evidence of which payments you do and don't receive; if you decide to make an application for possession against the tenant based on outstanding rent, you will be required to provide a copy of the rent payment transactions under court rules. By regularly checking your bank account, you will be able to stay in control and immediately see when payments have failed to come through.
Once you notice a failed payment from one of your tenants, the key is to act quickly. Do a bit of digging to identify the cause of the issue. Talk to your tenants calmly and fairly to understand their situation. Does their failed payment stem from a short-term issue (for example, they simply forgot to pay or they are having temporary cash flow problems), or is it a long-term issue (such as one of them losing their job)?
Solve the issue
If you have a good working relationship with your tenant, you might want to consider delaying or reducing the rent for a short period. This will show goodwill to your tenant, and it could save you the headaches and costs involved in evicting them and finding a replacement. If you do decide to either delay or reduce rent, you should make it clear in writing that the delay/reduction is for a set period only, and give a date by which the rent will be due in full. Also, if your tenant has a guarantor (a third party, such as a relative, who agrees to pay rent on your tenant's behalf if it's not paid), you should write to them about 10 days after the rent was due and let them know the tenant has failed to pay up.
Hopefully, by speaking to your tenant and/or their guarantor, the issue of a failed rental payment will be resolved easily and without much hassle. However, it's still worth keeping accurate records of all payments and correspondence. Written correspondence has the advantage of leaving a paper trail, which may be useful should legal proceedings follow. For example, if you and the tenant come up with a plan for them to catch up on their missed payments, type up a written statement of this agreement (also outlining the consequences if they fail to follow this plan) and post it to them, keeping a copy for your own records to serve as evidence that the problem had been raised with the tenant.
Taking the matter further
Some tenants are more difficult to deal with than others. If, after several days of phone calls and attempts to speak to the tenant, the rent hasn't been paid, send them a formal demand by first-class mail. If you still haven't received the outstanding rent after 14 days, send the tenant's guarantor a letter informing them that the tenant hasn't paid their rent. If you still haven't received rent after 21 days, send a final letter confirming your intention to take legal action and send their guarantor another letter stating that payment still hasn't been received. You should also confirm your intention to take legal action if the rent isn't paid.
If your tenant has gone a month without paying rent and their next payment is due, you can now consider your tenant to be two months in arrears. This means, under the Housing Act 1988, you have the right to take action to claim possession of your property.
If your tenant is still within the fixed term of their contract, you'll need to issue them with a Section 8 Notice informing them that you intend to take them to court if they don't pay up. You will need to specify the detail the exact grounds on which you are seeking possession. If the court decides your application is justified, they will grant you a possession order, allowing you to get your property back. If the tenant refuses to leave, the landlord will need to appoint a bailiff for the eviction. Also, a judgement for the arrears of rent may also be granted, meaning you may also make a claim for interest and costs.
If the fixed tenancy period has come to an end, you can serve your tenant with a Section 21 Notice which is valid for 6 months. This notice is not fault based, so you don't need to specify why you want to reclaim your property and the tenant does not need to have breached the tenancy agreement. You cannot serve a Section 21 if you haven't protected your tenant's deposits in one of the government backed schemes. Once you've issued a Section 21, your tenant has two months to leave your property. However, it's worth bearing in mind that if you take this course of action, you forgo any chance of reclaiming unpaid rent that might be due to you.
You can also add legal protection to your policy to protect you from you against, you guessed it, any legal costs should you need to take your tenants to court. Having legal protection on your policy will cover the legal costs incurred from this action. Legal protection would cover you should you seek legal counsel for advice on a number of tenant issues, and is likely to have a limit to the amount of money you can claim back.
Disclaimer: This guide is accurate to the best of our knowledge and is intended to give a rough overview of this complex area of legislation and recommendations. It is by no means comprehensive and cannot replace professional legal advice.
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