RENT ARREARS: Finding a balance between compassion and collection.
Although rent arrears have been a hot topic during the pandemic, it’s far from being a new subject. That said, if the discussion has taught us anything in the last year, it’s that anyone can be affected by economic events: no-one is immune, however high their income.
Most tenancies run their course without arrears building up, but that means landlords and tenants have little experience to draw on when payments fall behind. Regardless of how and why they happen, arrears can be a source of friction and provoke all sorts of feelings and emotions around the possible repercussions.
For a self-managing landlord, it's vital to keep a level head when discussing arrears with your tenants. That might be challenging when their financial circumstances impact your own, but it's essential to avoid communication breaking down.
If you're unsure of how to approach any rent arrears at your rental property, you're welcome to get in touch. Part of a managing agent's role is to keep things polite and professional before they get too personal, which makes us well versed in acting as a cushion between emotions. So if you'd like some words of wisdom, or you'd like someone to handle things on your behalf, call us on 01525 713111 / 01767 669222 or email us at landlords@urbanandrural.com.
Money can be a touchy subject, but as you'll discover in this week's article, there are many ways to keep the conversation going without sinking into acrimony or legal proceedings.
GET THE FULL STORY
You'd be right in feeling you shouldn't have to chase your tenants about their arrears, but your tenants could well be terrified of contacting you. They might feel poorly equipped for an unpleasant or difficult discussion, and they may even be hugely embarrassed.
The key is to make it clear that you acknowledge whatever predicament your tenants find themselves in and that you'd like to properly understand what's happening in their lives to find the most practical solution.
Feeling listened to will allow your tenants to open up and be completely straight with you while concentrating on the facts, and getting a clear and detailed picture will help you keep a calmer disposition.
FIND QUICK FIXES
Your tenants may have simply hit a temporary glitch, so the first question to ask is: what can they pay right now? By exploring options beyond all-or-nothing, you could agree on a short period of reduced rent, with the arrears spread across future payments over a set number of months.
You could also help your tenants to identify potential savings in their other outgoings to use towards their rent. Just as lenders ask borrowers to write down all their monthly expenses, you can invite your tenants to do the same. Having it all laid out in front of them may open their eyes to ways of reducing their costs.
Daily habits and direct debits can mount up without us realising. It's not hard to clock up hundreds of pounds per month on coffees to go, club memberships or entertainment subscriptions: pressing pause for a while could help your tenants make a swift and significant dent in their arrears.
If they have other debts attracting interest, would they be better off by transferring their balance to a 0% card? Not everyone keeps on top of current rates, and the combination of reduced payments and savings on interest could put your tenants in a better financial position, freeing up money to catch up on their rent.
BORROWING & BENEFITS
If you have a longstanding relationship and your tenants have been exemplary until now, you may well want to keep them, which is as good a motivator as any for helping them to find a solution.
Could they borrow from a family member or friend to clear their arrears? Coming from an understanding source, it will almost certainly be the cheapest option and probably the most flexible.
If your tenants still have an income and they're not heavily in debt, a personal loan from a bank might provide an appropriate answer, particularly with low interest rates. Unlike landlords, lenders are designed for borrowers to split their payments into small amounts over many years, and the cushion of an extended repayment period could allow your tenants to catch up on their rent immediately without having to find all the money upfront.
If the situation is more drastic and your tenants have lost their income, point them in the direction of the Citizens Advice Bureau. They should be actively encouraged to find out whether they are entitled to any support and when it will be available to them.
CONTACT GUARANTORS
If a guarantor was named on the tenancy agreement, you can approach them for payment.
You're entitled to write to the guarantor as soon as the rent falls behind, but most tenants would prefer to find a solution directly with their landlord if at all possible, and they'll appreciate your attempts at working something out with them first. That's because guarantors are very often parents, and tenants can experience a level of embarrassment in feeling they still need to be rescued by mum and dad.
Nonetheless, the whole reason for having a guarantor is to provide a safeguard in the event of your tenants not being able to pay their rent. Involving the guarantor will open up another path to clearing the arrears and having the rent paid on time until your tenants' financial position improves.
LET YOUR TENANT GO
Most tenants don't voluntarily choose to stop paying their rent. They could be suffering severe financial hardship from whatever circumstances they find themselves in, and their rental contract might be adding to the problem. Sometimes, something has to give.
With or without eviction bans, you could simply let your tenants move out to save them accruing any more arrears. If they have family or friends they can stay with, the money they save on bills and rent will allow them to repay you faster and could solve three problems in one:
you prevent the arrears building up any further;
you provide a route for your tenants to repay what they owe;
you get to find a new tenant, so your rental property can produce income again.
The exact wording and requirements of tenancy agreements are there to hold everyone to their responsibilities, but there are occasions when letting go can provide a more practical answer.
In summary
There's no doubt that dealing with rent arrears can be a challenge. While it might be little financial comfort, you can be sure your tenants will be just as uncomfortable having so much uncertainty hanging over their lives as well.
Peace of mind comes from staying on top of problems when they arise, rather than letting them fester. Some self-managing landlords cope with that perfectly well and have enough knowledge and confidence to be unphased by difficult discussions with tenants. Others prefer a quieter life, opting for a managing agent’s experience and capacity to act on their behalf.
Either option is fine, but if you'd like to explore having your rental property looked after for you, or you've got any questions about being a landlord, you're welcome to get in touch. Call us for a chat or email us at landlords@urbanandrural.com - we're here to make your life easy.