Tenant Not Paying Rent?
We talk in this blog article about what to do when a tenant not paying rent and you are left with tenant debt. The rental industry has enjoyed phenomenal growth over the past couple of years. More and more property owners are having an easier time finding tenants, and the majority of investors are having great success with turning a profit on all of the homes they rent. However, tenants can often be irresponsible and they may cause you more trouble than they’re worth.
As a landlord, one of the most frustrating situations to be in is when a tenant’s rent has fallen into arrears. It means you won’t get paid and it could devolve into a game of cat and mouse as you chase those tenants for the money they owe you. It’s incredibly annoying to deal with and wastes a lot of your time.
Unfortunately, tenants that aren’t paying their rent aren’t that uncommon and it’s important that you learn how to deal with them in the most efficient way possible. Your goal is to strive to lower the amount of work it takes to locate a tenant and also look for ways to make them stick to their responsibilities. In this article, we’re going to tell you how you can deal with tenants that are uncooperative and refuse to pay their rent.
Picking the Right Tenants
There are ways to tell a bad tenant from a good one, and it usually involves looking at their history, their application and even meeting with them to see what type of person they are. It sounds rather obvious, but you should be great with people and observant enough to tell when someone is lying to you and giving you a false personality. There are plenty of “fake” tenants out there that will dress up and openly lie to you about their circumstances, so it’s important to look at their records in order to get a better idea of what they’re capable of.
Make sure you check the credit rating, employment status, and references of your tenant before you admit them to stay at your property. Take a look at how they handle their money, make sure they’re actually employed or work their own business, and make sure there are references. While it might be difficult to secure references for tenants that have no history of renting in the past, it’s still something that has to be done in order to secure the right tenants that you know will pay their rent on time instead of frustrating you.
Understand Your Rights
You might give a quick to call a lawyer when your tenants don’t pay, but you should understand your rights as a landlord before you take any action. If you’ve taken all the necessary precautions such as screening your tenants and managing an inventory of your property, yet you’ve still somehow managed to invite difficult and annoying tenants through your doors, then it pays to know your rights.
It will help you avoid these situations in the future and it will give you information on how you can go about getting your money back from those frustrating tenants. Below, we’ve outlined a couple of the most important rights that you should concern yourself with.
Regarding rental payments, you need to have a written tenancy agreement in place. This will settle how much rent is payable and when it needs to be paid. Make sure you and your tenant come to an agreement to have their rent paid into your account by standing order. This way, you have evidence on which payments you receive and also which you don’t.
This will be indispensable proof when it comes to proving that your tenants have indeed not paid. If you find that a tenant has refused to pay rent for a set period and they have refused to contact you regarding a solution, then it’s within your rights to serve them an eviction notice. However, this isn’t just a case of sending a notice and there is a process that you must follow. You may also attempt to reclaim any rent that has still been unpaid. Make sure you read through the terms and conditions set out by your letting agent before you sign any agreements and papers.
Most letting agents will offer one of two options; a full property management service or an “introduction” service. The former is, as the name suggests, a full property management package where they’ll help you chase down tenants that don’t pay their rent as part of your agreement. The latter is just an introduction service that, depending on the terms and conditions of the letting agency, may not include assistance that helps you track down tenants.
If you need to find tenants on your own, then it’s a good idea to look at a service like Tenant Tracing. It’s a tenant tracing service with a no trace no fee business model and a 96% success rate in finding former tenants. Results are usually available within a week (or just 24 hours if you choose to pay more) and prices start from just £29 excluding V.A.T. It’s an affordable way to help you find tenants and chase them down for unpaid rent, and it’s a great option for those that have not applied for a full property management package with their letting agent.
When it comes to raising the rent, it’s possible to do so but only if it follows the tenancy agreement that you’ve set out. You may need to wait for a fixed term to end before you’re able to increase the rent or else you could be breaching the contract. However, you won’t be able to charge an arbitrary amount and force your tenant to accept it or move on. In many cases, the rent has to be justifiable and comparable to properties in your area. If you don’t follow this, then your tenant can complain and you may be forced to restore the rent to an even lower level that is acceptable.
These aren’t your full rights, but what you have available to recover lost money and your tenant debt will generally depend on how your letting agreement is set out. It’s important to speak to your agency in times like this, so make double sure that you’re able to understand it and also seek advice when needed.
Discovering Why Your Tenant Can not Pay
One of the first steps that you should take when trying to get tenants to pay is to try and understand their situation. Checking your bank account is one of the best ways to identify rent payment gaps, but you should also try and find out why those gaps are appearing in the first place. If you’re lucky, then the situation might not be due to a tenant refusing to pay in the first place and could be the result of something simple such as your payment processing method failing to work or the tenant forgetting to update their card details after their previous card expired.
There are also a number of other simple ways to fix a lapse in rental payments creating your tenant debt. To give you an idea of why your tenant might not be paying, consider a couple of these situations that could lead you to understand your tenant’s situation:
Your tenant may have simply forgotten to pay, especially if they have not registered an automatic payment method on the account. Temporary cash flow problems, such as being off sick from work, could have an impact on their ability to pay you rent. Perhaps there was a misunderstanding between your tenant and their roommates regarding rental payments. This is more likely if you have multiple tenants living together on the same property. It’s possible that your tenant is on holiday and has forgotten to both inform you and leave a deposit for the rent.
This might be caused by a trip that lasted longer than expected, or simply because they forgot. If there has been a dispute regarding something like an interior repair, then your tenant may be refusing to pay rent due to the situation still being unsolved. Frustrated and annoyed tenants may be unwilling to continue paying you especially if Your tenant may have long-term issues regarding their income, such as losing their job suddenly or having unexpected medical bills to pay.
Your tenant may also be suffering from a failed relationship with their partner, resulting in less cash flow and more problems in paying their rent. In some cases, the effects could be caused by something more challenging, such as personal issues and illness that are preventing them from both making payments on time and making money in the first place.
These are situations that would give your tenant the benefit of doubt. However, it’s still good to keep in mind that your tenant might just be refusing to pay their rent.
Gathering Evidence Before Making a Case
Before you decide to escalate the situation in regards to tenant debt, it’s important that you gather proof that your tenants are refusing to pay and for malicious reasons. If you’re unable to deal with the problem quickly then you’ll need up-to-date and accurate records. A phone call to your tenant is a good start, especially if you feel like the issue could be solved quickly, However, written correspondence is preferred because it leaves behind a paper trail that can be used as proof that you have contacted the tenant.
If you and the tenant are able to come to an agreement regarding their payments, then it’s in your best interests to keep this all in paper format so that it is traceable and can be provided as proof. You should also mention what consequences your tenants can expect should they fail to pay the money they owe you.
If they continue to fail their payments, then you can use these paper records as proof.
If your tenant has assigned a guarantor to help pay their rent on their behalf, then get in touch with this person and write to them that the tenant has yet to pay their rent. In most cases, this can quickly solve the problem of your rent not being paid, but if it doesn’t, then you can also take legal action against the tenant’s guarantor in addition to the tenant themselves.
If you’ve compiled plenty of information to help you make a legal case, then ask yourself one more question; is it worth it? There will occasionally be times when a tenant cannot pay and it’s not worth your time to pursue legal action over a single week’s worth of rent. The cost of getting lawyers involved because your tenant is still refusing to pay is expensive, so you’ll need to decide if it’s worth it or not. Keep in mind that you’re not guaranteed to get your money even if you do pursue legal action, and you may be paid at a much later date.
Dealing with tenants that don’t pay and create a tenant debt is difficult. You may find yourself frustrated at the entire situation or you might even feel depressed because you’re unable to chase down tenants that are refusing to pay. Whatever the situation is, you must be prepared to take legal action.
The best way to avoid this in the first place is to screen your tenants and make sure that they’re a suitable fit for your needs. Mistakes can be made, but getting a good picture of your tenants before letting them into your property is perhaps one of the best ways to ensure that you’re always paid on time. Non-paying tenants are simply a risk to your investment, and you need to plan accordingly in order to mitigate the potential losses you may experience.
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