When letting a property, one of the most common concerns you’ll have is whether the tenant is going to stop paying rent during the tenancy and in this article, we’ll look at a rent collection service and the best way for landlords to collect rent from tenants.
Setting up a rent collection service
From our own experience of managing hundreds of thousands of pounds of rents and deposits for landlords across the United Kingdom, the most important aspect of setting up a rent collection service is to make sure that the tenancy and pre-tenancy documentation is all in order.
This includes but is not limited to:
- The tenancy agreement detailing any penalties for late / non-payment of rent is signed and executed
- The tenancy deposit is secured and certification is issued to the tenant
- Right-to-rent checks have been carried out to confirm tenant status
- How to Rent Guide has been issued to the tenant
- Gas Safety Certificate has been carried out and issued to the tenant
- Energy performance certificate has been handed to the tenant
These documents should all be in place and ticked off our complimentary landlord’s checklist.
If you have set up the tenancy correctly in the beginning then you are off to a good start in terms of ongoing rent collection.
Best way to collect rent from a tenant
It is not commonly known that a tenant can pay the landlord by any method they wish – standing order, cheque, direct debit or even cash.
Although you may insist in the tenancy agreement that the tenant must set up a standing order, there is really nothing you can do about it if the tenant cancels the standing order and pays you by bank transfer. As long as the tenant fulfils their contractual obligation to pay you the correct amount of rent on time every month then there is no issue.
Of the rents we collect as part of our rent collection service for landlords, around 80% of the rental payments are received by Faster Payment. Faster Payment is a method one uses to transfer funds through personal internet banking and the funds are usually cleared in the account within 2 hours. This is a very convenient way for our tenants to pay their rent, especially with mobile banking.
The remaining 20% is a mix of standing order payments, cash deposits, credit cards and international bank transfers.
How to deal with tenants not paying rent
In the grand scheme, most tenants are great tenants and will pay their rent on time. I was pleased to see that thought is being given to include consistency of rent payments as a measure of a tenants credit score.
However, no matter how prepared you are, some tenants will be late paying their rent. That is a fact – especially when you collect hundreds of rents a month. The reasons vary from; they didn’t know they were late, they thought the standing order was set up, they forgot, they haven’t been paid yet or the bank must be experiencing issues!
We’ve set up our hundreds of rental payments in such a way so that it is instantly identifiable if a tenant is late by 1 day.
Speed and courtesy in dealing with a tenant that is late paying rent is one of the most important factors. If you leave late rent payments for too long, it becomes increasingly difficult to deal with going forward.
Outsourcing to a rent collection service agency
Having conversations with tenants about late rent is never pleasant and there are genuine reasons why a tenant may be late and that is why I stress the importance of being courteous and professional in your communication.
I would also advise that all communication be in writing so that you have a record in case it is needed to evict the tenant and gain possession.
You cannot be seen to be harassing the tenant i.e. arrive at the property and knock on the door. First, you must send formal letters of demand and include the tenancy agreement highlighting their responsibility to pay the rent on time.
This should then be followed up with a series of letters over time and if the tenant continues to withhold rent, you may have to go down the eviction process.
Rent collection service packages
If you would prefer not to have to deal with the tenant not paying rent, I would advise going for one of our letting packages which include a rent collection service – this would be either the Guaranteed Rent or Rent on Time package. Both offer a rent collection service, rent guarantee insurance and help with dealing with rent arrears and gaining possession.
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You may have watched our recent case study video where we helped one of our landlords with a rent arrears claim?
Well, just this week, we were successful in another rent arrears claim to the value of over £7,500 where the tenant remained in the property for over 5 months without paying rent. Fortunately, in this instance, the landlord’s rent was protected by our Guaranteed Rent package and his rent was paid in full during the 5 month ordeal – all for just £49 inc vat per month!
If you are getting ready to let out your property or you are considering moving away from a high street agency service, please give the office a call on 0333 577 888 and a member of our landlord team will be happy to help.