Plan Insurance Blog

How To Recover Rent Arrears Without Losing Your Tenant

Being a landlord should be simple – tenants live or work in your property, and in return, they pay you for it. You both sign a lease, and everything is clear. But, If either party doesn’t keep up their side of the bargain, problems can snowball.

Unpaid rent is the holy grail of landlord challenges. It affects cash flow and can create significant conflict between landlords and tenants. No letting agent or landlord enjoys chasing tenants for money. However, it doesn’t always spell the end of a professional relationship. Actively recovering rent shouldn’t mean that landlords lose tenants or that tenants lose properties.

We share below some guidance aimed at resolving the situation with a mutually beneficial outcome.

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Find Out What The Issue Is

It is easy for both parties to take the human element out of the equation. Landlords may believe if they allow tenants to pay rent late once, the tenant will stop paying rent altogether.

As a result, some letting agents and landlords will aggressively pursue rental arrears immediately. This is sometimes necessary, but only as a last resort.

Sheila Manchester of The Negotiator gives the following advice, “there are always two sides to the story. There is often a good reason why tenants can’t or won’t pay rent. The sooner you find out what the problem is, the sooner it’s likely to be solved.” It is easy to assume the worst, but there is often a valid reason why rent isn’t being paid. The tenant is rarely outright either refusing or wants to get a free ride.

Speak to your tenant and gently ask them why they haven’t paid. Many times it will be a temporary issue that is unlikely to happen again. For example, it could be due to a loss of earnings, family issues, or illness. Again, try to be cooperative instead of argumentative or aggressive.

Sometimes, the issue will be something that could turn out to be a long term issue. In any case, listening to your tenant will help you understand their needs and prevent surprises further down the line. Communicating with your tenant will also give you an insight into their intentions regarding repayment.

Inquire To The Tenant’s Financial Situation

It may feel awkward or unnatural to ask these kinds of questions candidly in person, but it is standard practice to ask tenants to submit income and expenditure forms.

You can even set a deadline by which the tenant has to present this information. This helps both you and your tenant to put down on paper how much they can afford to pay. Understandably, some tenants will be reluctant to provide this information.

If there is a real possibility that rent arrears will not be fully repaid, requesting income information can clarify whether this is likely to be a short or long term issue. If necessary, it also lays the foundation for a conversation about whether it is genuinely sustainable for the tenant to remain in the property.

Discuss Short and Long Term Practical Solutions

Remember that your tenant will likely be worrying about missing a rent payment. In light of this, instead of scolding them, work with them to focus on coming to a solution. If the tenancy has been otherwise satisfactory and the tenant genuinely wants to repay, an agreement can likely be reached.

A long-term solution could be an arrangement where a tenant pays their regular rent, plus an additional sum for the rent arrears. The payments can be spread over several months until the debt is paid. This option relieves the stress of having a tenant with rent arrears because you know the debt will eventually be settled. But, naturally, if the tenant breaches the repayment terms, then further action may be needed.

A short-term solution could be to suggest to tenants that they look into housing benefits, as they may be eligible without realising. Some tenants may be in the process of an application or need help submitting one. Remember, it is also possible to apply to the council for housing benefits to be paid to you as the landlord directly.

By communicating openly and providing a compassionate ear for your tenant, you should reduce stress and financial losses for both of you.

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