Rent
Arrears
Many investors consider rental property
to be a sound investment when
compared to other forms of saving.
However, at the recent National Housing
Federation conference the Archbishop of
Canterbury, Justin Welby warned of the
possibility of “large scale” and “growing”
rent arrears as a result of rising fuel
costs and the government’s controversial
‘bedroom tax’.
So what options are available
to landlords if their tenants stop
paying rent?
It’s important to act quickly if the tenants
start missing rental payments. The
landlord’s first course of action should be
to engage in open and honest dialogue
with the tenant. If the financial difficulties
are likely to be short-term and the tenant
makes realistic proposals for bringing the
arrears up to date, the landlord may well
be prepared to ‘wait it out’. Otherwise,
if the tenant is unwilling or unable to
clear the arrears, there may be no option
but to seek possession of the property
through the legal process.
Even if the landlord does ask the tenant
to leave, maintaining a good relationship
should be a priority. After all, the
landlord will want the tenant to keep
the property in good condition until he
moves out.
Some tenants move out voluntarily
and with little fuss. However, many will
refuse to co-operate with the landlord at
all and will not leave the property until
forced to do so. Particular difficulties
arise because local authorities will not
re-house tenants who have voluntarily
made themselves homeless. Advisory
services such as the Citizens’ Advice
Bureau will always tell these tenants
to remain at the property for as long
as possible. In some cases it can take
over six months for the landlord to gain
possession.
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Often the most appropriate course
of action is to gain possession of the
property and re-let it as quickly as
possible to minimise any further losses.
If the tenant has an Assured Shorthold
Tenancy agreement (AST) with a fixed
term of six months, it may be possible
to serve notice to quit upon the tenant
pursuant to section 21 of the Housing
Act 1988. This gives the tenant two
months notice to vacate the property at
the end of the tenancy agreement.
It is worth noting that a section 21 notice
cannot be validly served if the deposit
taken by the landlord at the outset of the
fixed term of a tenancy is not held in an
authorised deposit scheme such as the
Tenancy Deposit Scheme. The recent
case of Superstrike Ltd v Rodrigues
[2013] EWCA Civ 669 demonstrates how
a landlord can come unstuck trying to
evict a tenant without holding the deposit
correctly.
Section 21 cannot be relied upon
to recover rent arrears or to gain
possession mid-tenancy. In these
circumstances, the landlord must serve
a notice pursuant to section 8 of the
Housing Act 1988. A section 8 notice
can be served on a number of grounds
including non-payment of rent, late
payment of rent, creating a nuisance
or some other breach of the tenant’s
obligations. The specific reason(s) for
eviction must be stated in the notice.
If the tenant fails to comply with a notice
there are two litigation routes available to
the landlord:The standard procedure – if the
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