Last week’s newsletter article “Tenants struggling with Paying rent” was our hottest topic.

It has warranted a Part II article with options where lettingaproperty.com can provide uneasy landlords with some help.

Demand for rental property is soaring, largely due to the difficult mortgage market facing young house movers and first-time buyers.  This, in turn, has allowed landlords to confidently expand their portfolios and in most areas of the UK, increase their rents!

It would be a mistake to think that nothing could go wrong!  It is arguably the moment that investors become overly confident that they lose their grip on what should be an ideal situation for landlords to find themselves in.  One of the biggest concerns currently arising across the country is the issue of rental arrears.

As redundancies and pay freezes are made by employers – a growing number of tenants are finding themselves in financial difficulty.  Let’s not forget that the problem is magnified by soaring utility costs, food and fuel prices.

Combining these factors with huge debts that families across Britain are trying to pay down, it is somewhat understandable why so many tenants may be struggling to make their rent payments.

According to the Association of Residential Letting Agents (Arla), there is an ever-expanding mountain of evidence to suggest that the “UK’s renters are increasingly struggling to keep on top of household finances“.

Tenants’ failure to meet rental payments can have serious impact on a landlord’s own personal finances.  For those who have encountered the problem will know just how severe the repercussions can be.  Most buy to let landlords will rely on their rental income to meet mortgage repayments.  If tenants’ arrears persist, owners can face an increasing risk of repossession.  So if you’re renting out a home to tenants unable – or unwilling – to pay their rent, what are your rights?

Landlords Rights

• Firstly, ensure that your tenant is aware of the situation, from what is expected of them and the fact that their failure to make timely payments could have serious legal implications.   This should be detailed on the tenancy agreement and signed by both parties before the tenants takes possession of the property.  We are still hearing of landlords that have verbal agreements with tenants  – this is a huge risk as it is very difficult to prove in court with no evidence.

• If they fall behind on several payments then issue them with a formal reminder of their rental obligations. Written communication is best and you should always keep your own copy of any correspondence,  just in case the matter ends up in court.  Landlords can easily access downloadable rent arrears letters online, ideal for use as a template.

Should your difficulties continue, you may begin thinking about your options with regards to getting the tenant out of your property.

Possession Options

Here, you are offered two options, outlined by Sections 8 and 21 of the Housing Act 1988.

1. If within the fixed term of the Assured Shorthold Tenancy agreement, you must issue the tenant with a Section 8 notice.  However, In order to reclaim possession of the house or flat, you will need to specify the legal grounds on which you intend to proceed. Provided that the court believes your reasoning to be fair and justified, you will be issued with a possession order.  This would then allow you to reclaim your property.
2. Section 21 is often the favoured approach of landlords who need to begin possession proceedings, as – in theory – the process should be far simpler. This is largely because this piece of legislation only applies to tenancies where the rental period has come to an end.

Landlords are therefore not required to state why they are looking to reclaim possession.  This should make it easier for a judge to rule in the owner’s favour.

Unfortunately, the process is not completely without fault.  Even if the courts do grant a possession order, regaining control over the property is not always a simple and hassle-free procedure.

Should the tenant still be in residence by the time their notice period expires, you are then legally required to issue a notice of intention to seek possession.  This formally indicates that you will be applying to the courts to have them evicted.  Provided the court rules in your favour, the tenant will be given a specific date by which they need to vacate the dwelling.

However, the courts have the option to ‘suspend’ the possession order.  This would allow the tenant to remain living at the address, provided they meet certain conditions laid out by the judge.

Steps to take to avoid late rent payments

The best way for landlords to protect themselves is to avoid picking the wrong tenants in the first place.  Yes, it is true that anyone can fall behind with rent – particularly amid economic uncertainty.  However, landlords can potentially reduce their risk of being plagued by tenants in arrears by carefully screening their prospective suitors before handing over any contracts.

Jonathan Daines, Co-Founder of lettingaproperty.com offers his top 11 tips for landlords to prevent rental arrears:

1- Tenant Referencing.

As a starting point, you should always attain comprehensive tenant references.  These checks will look in detail at a) your prospect’s credit history, b) their employment history and c) a previous landlords reference – allowing you to make an informed judgement as to the risk of them failing to pay up.  Some landlords will also request 3 month’s bank statements to show the tenant is able to manage their incomings and outgoings on a monthly basis.  Remember, it is industry standard that the tenant pays for the cost of obtaining references – not the landlord.

2- Meet the Tenant at THEIR Property.

Arrange a meeting at the tenant’s own property to discuss the terms of the agreement.  This is a fantastic opportunity to see how the tenant lives in another landlord’s property.

3- Google Search.

You would be surprised that just by searching the Internet using either the tenants email address or name could reveal vital information about your tenant.  There are a number of ‘name and shame’ websites and forums where victim landlords have offered their tenants details online for the aid of future unsuspecting landlords.

4- Solid Tenancy Agreements.

Create a legal written tenancy agreement and have both parties sign.  As above, do not enter into verbal agreements with tenants.  Always agree on 1) the rental price 2) payment frequency and 3) length of the agreement

5- Insist on a Break Clause.

It is always easier to evict a tenant using the Section 21 notice once the initial fixed term has expired.  If you had signed up to a 3 year agreement, your options would be limited to the Section 8 Notice which is harder to prove.

6- Always have an Inventory.

This document is often overlooked by landlords – particulairy those that let “unfurnished” property.  They are under the misconception that because there are no furniture items in the property, there is no need for an inventory.  This is wrong, you should list ALL items in the property that the eye can see from carpets on the floor to lightshades on the ceiling.  You can download an inventory template here.

7- Treat your Let as a Business and try to remove the emotional aspect from the transaction.

This is more difficult for landlords letting our their own home for undertsandable reasons.

8- Visit the Tenant Quarterly.

It is your right to be able to visit the property to carry out an inspection.  Just be mindful that visiting too frequently, i.e. once a month could be seen as harrasment in the eys of thew law – remember, the tenant has the right to “quiet enjoyment” of the property.  Every 3 months is ideal.  You must send the tenant a letter to confirm your appointment and it must be received no earlier than 24 hours in advance.

If you would like an example of the “First Notice of Inspection” to send to your tenant, just leave a comment below and we will email one over!

9- Keep the Rent Under Market Value.

Quite simply, if the tenant feels that they are getting a good deal on their property, they will be more inclined to pay the rent and to stay longer.

10- Rent Guarantee Insurance.

Landlords have a superb opportunity to mitigate any rental arrears with rent guarantee insurance.  This is an insurance product which has been specifically created to support landlords in the event that the tenant is unable to pay their rent.  lettingaproperty.com includes rent guarantee in their “Platinum” service which means that the landlord will be guaranteed up to £10,000 per month as well as up to £25,000 help with legal fees.

11- Communicate Regularily with your Tenant.

It is best to have open lines of communication with your tenants.  If you notice that the rent is a day late, pick up the phone and have a frank conversation with them and try to find out if they are experiencing any financial issues.  Talking to a landlord recently, I was impressed with a solution to help the tenant with their finances but at the same time, ensured the landlord got paid and that was to increase the frequency of payments – i.e. instead of once a month, the tenant agreed to pay once a week which she found easier to manage.

Considering the risks and the severe knock-on implications that rent arrears can have, landlords should simply remember that one can never be too careful.

Source : Stride, The Independent Insurance Specialists

A landlord who fought to evict his ‘tenants from hell’  left such a trail of ruin that police have classified it as criminal damage.

He believes that the tenants, who came via a letting agent, supplied false references.

Landlord Glenn Schofield had gone to great expense and trouble to refurbish the property, a four-bedroomed house in Darlington, before the tenants moved in.

He will now have to do the work all over again – and more – having also lost more than six months’ rent.

Damage included carpets pulled up, windows smashed, the kitchen ripped out, banisters left hanging, paint splashed across walls and the toilet blocked and overflowing, while a ceiling gave way after lead flashing on the roof was removed.

The damage was done by the time Mr Schofield successfully gained an eviction order through the courts to remove the tenants.

Mr Schofield said: “It’s almost indescribable. I’ve done everything by the book, but I don’t understand why it has taken so long.

“I don’t know how much it is going to cost to repair and I don’t even know yet whether the insurance company will pay out for it.

“If they don’t pay out, then I’m really in the mire.”

Community beat officer PC John Forster said: “Normally when there’s a problem with landlords and tenants, it tends to be resolved as a civil case.

“However, here the level of destruction is so high that it’s criminal damage without a doubt.

“It’s just reckless destruction. The upsetting thing is the level of pride Mr Schofield took in the house, and then someone comes in and trashes it throughout.”

Mr Schofield said problems began shortly after the tenants moved in last June. When they stopped paying rent in February, he began the eviction proceedings, which have taken him over six months.

The case highlights the difficulties landlords have to secure possession when they do things through the book and go through the county courts With many county courts due to close, the length of time that a lawful eviction takes could stretch even longer.

Angry landlords say the long and ponderous procedure, which is riddled with loopholes that work in the tenants’ favour, leaves them powerless to prevent tenants exacting their revenge by trashing properties.

Last year, the Residential Landlords Association delivered a petition to Downing Street calling for a fast-track eviction process.

Jonathan Daines of LettingaProperty.com’s Landlord Team commented on the damage to Mr Schofield’s property saying that

“It is extremely frustrating for landlords who set out to provide a safe and comfortable home for tenants only to have it thrown back in their faces.  There are unfortunately, rather unscrupulous people out there who will take advantage and it is very important to try to weed these people out before you had over the keys to your property.

If you are going to carry out your own tenant references, DO NOT allow the tenant to produce the references themselves.

If you have an employment reference, make sure you search the company on the Internet and call the number on the company’s website to speak to the tenant’s line manager or HR department.  Do not accept references from employers if they come from a generic hotmail or gmail email address.”

If you decide to instruct a company to carry out the references, make sure they follow this simple process to minimise the risk of bad tenants.

To discuss our comprehensive  tenant reference process in further detail, please call our landlord team on 0330 660 1020.

Source: www.lettingagenttoday.co.uk

Tenants from hell could be kicked out of their homes much faster, housing minister Grant Shapps is proposing.

He is to introduce a new mandatory ground for possession of a property where tenants have a track record of anti-social behaviour.

Previous convictions would be taken into account to shorten the current lengthy, and often expensive, eviction process whereby landlords have to prove each new incident of anti-social behaviour.

Previous offences that could be taken into account would include convictions for violence, drug dealing and criminal damage.

The proposed new mandatory ground for possession would be available to both private landlords as well as local authorities and social housing organisations, although the Government does not expect private landlords would often need it, given the provisions of Section 21.

A consultation is now out on the proposals and can be found at http://www.info4local.gov.uk/documents/consultations/1959469

Source: Letting Agent Today

The number of court orders to evict tenants is up 9% in the last year, and look set to rise further.  The number of tenants in severe rental arrears is up by 13%.

However, the impact of tenants’ arrears has yet to filter through to landlords, with total buy-to-let mortgage arrears cases falling by 12% in the last year

According to new research by Templeton LPA, which acts as a receiver of rents for lenders whose landlords have defaulted, the number of tenants in severe financial difficulty has climbed rapidly in the last quarter.

It says there are now nearly 8,700 more tenants over two months in arrears.

Some 74,492 tenants in England and Wales are in severe arrears – a 13% increase compared to the same time last year.

This also represents an increase of 4% compared to 71,483 in the previous quarter.

Nevertheless, tenancies in severe arrears represent just 2.1% of all properties in the private rental sector in England and Wales.

The growth in tenant arrears has been mirrored by a rise in the number of tenants being evicted through court orders.

In the last quarter, 24,170 tenants faced eviction notices – an increase of 9% on the 22,091 a year ago. But the change is not just annual. In Q1 2011, there were 5% more than in the last quarter of 2010.

Paul Jardine, director and receiver at Templeton LPA, said rising rents were helping to fuel the increase in arrears.

He said: “There’s no denying that tenant finances have been under mounting pressure in the last six months. Rents have risen consistently in the past year to a record high, and the cost of living is taking its toll.

“This is causing many tenants on lower incomes to fall further and further behind with monthly payments.

“But with demand so strong for rental properties, and rental income providing the lion’s share of annual return at present, many landlords are becoming less lenient with arrears, and seeking court orders to remove non-paying tenants before they themselves fall into mortgage arrears.”

The increase in tenant arrears and evictions has not yet fed through into buy-to-let mortgage arrears. In the last quarter, the number of buy-to-let mortgages more than three months in arrears actually dropped by 8% compared to the previous quarter. However, at 29,400, there are still nearly three times as many buy-to-let mortgages in severe arrears compared with three years ago.”

But Jardine warned:  “The full impact of public sector spending cuts is yet to be felt, and rent rises are unlikely to slow in the immediate future.

“Tenant finances will continue to be placed under pressure, and it is crucial that landlords do not delay in contacting tenants to nip any potential payment problems in the bud as amicably as possible. Otherwise, buy-to-let mortgage arrears will begin to climb as the year progresses.”

Jonathan Daines, Co-Founder of lettingaproperty.com comments:

To discuss our tenant referencing service, please call and speak to a member of our landlord team on 0330 660 1020.

Source: LAT

The Lettingaproperty.com blog has looked at various aspects of the rental process. The time has now come to look at one area of the rental business which presents the most fear and stress a landlord or tenant will face…Eviction.

Most tenants can only be evicted in specific circumstances. Landlords must follow certain legal procedures before a tenant can be evicted. These usually start when a landlord gives notice in writing that the tenant will have to leave. This is a point where negotiation between landlord and tenant is advisable. If either party is unsure how to carryout such negotiations then seek advice.

The landlord has to give reasons why the tenant should be evicted; these may include, for example, showing that the tenancy agreement (assured shorthold tenants) has ended, that there is unpaid rent or that the tenant’s behaviour is unacceptable.

If the tenancy is assured the landlord must give one month, two months or 14 days’ notice depending on the reason for the eviction.

If rent is owed to the landlord it is likely that the eviction can be carried out regardless of the type of tenancy. With rent arrears the landlord still has to follow legal procedures before eviction. This usually involves giving written notice then applying for a court order, once the notice expires.

The court will only make a possession order if it is reasonable to do so. Tenants will have the chance to put their side of the story to the court.

Most landlords need to get a possession order from the court before a tenant can be evicted. There are several different types of court orders. A landlord has to get permission from the court before he or she can evict a tenant. This is called ‘applying for possession’. If the court gives the landlord a possession order this ends the tenant’s legal right to live there. The eviction can then be carried out.

The court provides the opportunity for both parties to argue their case and often it is possible to negotiate and ask the judge for time to pay off arrears in instalments or offer to make assurances to cease their offensive behaviour, and avoid eviction.

If the court delays making an order or decides not to make an order this could be because a landlord has not followed the proper legal process. With some types of tenancy, if the court thinks that eviction is unreasonable, they can suspend an order on terms (suspended possession order), for example if the tenant agrees on a payment plan to settle the arrears or stops unreasonable behaviour.

If the order is granted it gives a short time before the accommodation must be vacated usually between 14 and 28 days. If the tenant doesn’t leave, then the landlord can ask for a warrant (of execution) and the court bailiffs will be able to evict.

Landlords who use the services of online letting agents or private letting agents will have access to eviction professionals who are able to deal with the procedures involved. Tenants should seek impartial advice before things go from bad to worse.

Especially if your landlord happens to be the Solihull Borough Council in the West Midlands.

Mrs Hazel Palmer, aged 49, was evicted from her Council owned property on the 2nd February 2009 for failing to maintain the condition of her rental property, regardless of the fact that she had been given numerous chances to do so.

It clearly stated in Mrs Palmer’s Tenancy Agreement (as it should in all Tenancy Agreements) that she is to maintain the property internally and externally.

In August 2008, Solihull Council was granted a possession order by Birmingham County Court on the grounds of breach of contract. Mrs Palmer contested the order and submitted an application for the warrant to be suspended on the basis that she had since made improvements on the condition of the property.

A hearing then took place on the 23rd October at the Birmingham County Court, and Mrs Palmer stated her case.

An inspection on the property was carried out by a Solihull Housing Community Officer which revealed the fact that the Tenant had not made any such improvements and was told on the 26th November that she had one last chance to rectify the situation.

The Community Officer then carried out a further inspection on the property and once again, it was evident that the Tenant had still not made any improvements.

The second report was heard by the Court where it was decided that Mrs Palmer’s application to suspend the eviction was denied and as a result of this decision, the tenant was evicted from the property.

Bank Reposessions Could Top 75,000 in 2009

Governments’ recent proposal to assist Homeowners in avoiding repossession by the Banks will not extend to Buy to Let mortgages.

PM Gordon Brown, announced the ‘Homeowner Mortgage Support Scheme’ last week, which is aimed at supporting households that suffer a “significant and temporary loss of income” caused by the current economic recession.

The Treasury announced yesterday that the scheme would not be open to Buy to Let mortgages amongst other qualification criteria.  Households with mortgages over £400,000 would not benefit from the scheme which leaves around an estimated 10 million borrowers.    Take away, the estimated 1.7 million of those borrowers who have a buy to let mortgage or a second charge against their home, less any homeowner that has more than £16,000 in savings and, you must already be in arrears on your mortgage payments and you are left with around 10,000 households who are likely to qualify for the scheme.

In order to qualify for the scheme, homeowners would be required to speak to a debt advisor such as Citizens Advice Bureau or the National Debtline before before they entered discussions with their Lender.  The final decision to grant the relief would fall ultimately in the hands of the Banks and considering that HBOS, Abbey and HSBC had not offered concrete assurances that they would sign up to the scheme, it will take a little more pressure from Government for Banks to show willingness.

The Council for Mortgage Lenders estimate that there will be near 200,000 households who are more than 3 months in mortgage arrears by the end of 2009 and that repossessions could top 75,000 next year.