What to do if a tenant doesn’t pay

As a landlord, one situation you will want to avoid is that of having your hard earned rent, much of it probably going towards mortgage repayments or ongoing improvements to your property, sapped by legal fees or related losses. No matter how well prepared you are in advance, as with any other business, unwanted legal problems can and do still arise for a landlord, of which most will in some way involve the tenant. Of these, one of the most common is that of a tenant failing to pay their rent.

One of the first steps to preventing this problem is to ensure that you only take on the right tenant in the first place. You can vet tenants by obtaining a reference. This will allow you to identify past problem tenants, such as those who have previously defaulted on their rent, before you risk renting your property out to them. Effective practices include the obtaining of a previous landlord reference, work references, proof of income, an identification reference and a guarantor (as covered in more detail in our blog post on Best Practices for Landlords Obtaining Tenant References).

Non-payment of rent is a potentially very serious problem for landlords owing to the shortfall of income that results from it. Landlords investing in the higher end of the market are exposed to an even greater level of risk given the greater amount of money lost with each missed payment and their properties’ correspondingly high ongoing mortgage repayments. In the event of a tenant failing to pay, you may find yourself having to dip into your savings or worse, your own personal income to keep meeting these commitments. If you see a financial crisis looming as a result of a tenant failing to pay, get in touch with your buy-to-let mortgage company as quickly as possible. You may be able to negotiate reduced payments with them while you resolve your short term problems.

There are several reasons why your tenant may fail to pay some or all of their rent. It may be due to a genuine change in their financial circumstances during their tenure. Ideally, you should have some kind of monitoring system that can detect missed payments at an early stage, such as an internet banking account where they can be detected not in weeks or months, but in days.

You could visit your residential property yourself, giving the reasonable notice outlined in the tenancy agreement, to discuss the issue with the tenant. This offers the chance, while you’re there, to check over the condition of the property. Assess whether the tenant seems to be genuine and find out whether relatively exceptional circumstances such as recent unemployment are to blame. You can then negotiate some kind of arrangement with the tenant for clearing their rent arrears, for example, doing so in a single payment or in a series of smaller incremental payments until they are no longer in your debt. Getting this in writing and with the tenant’s signature can be useful in the event of the case going to court.

You should always try to maintain a good, courteous relationship with the tenant in question. However, it is best not to spend too much time in negotiations with them, as this can allow possibly already high debts to accumulate. In any case, once a tenant is two or more months behind with their rent, repossession becomes a simpler process as this is a Mandatory Ground for possession under Ground 8 of the Housing Act 1988.

Unfortunately, as a landlord it is unlikely that you will be able to recover all of your money in the event of your tenant failing to pay their rent. The best option is often simply to limit the financial damage by re-possessing and then renting the property out again as soon as possible.

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