Since March, the Covid-19 pandemic has affected many people's finances due to its impact on the global economy. As well as some landlords, many tenants will have been affected by having to take a pay cut, being furloughed or, in the worst-case scenario, losing their employment. The knock-on effect of this is that some tenants' ability to pay rent has been hampered, something which then has financial consequences for you, the landlord. The majority of tenants will be doing their very best to pay as much as they can and keep their debt to a minimum. But what can you do as a landlord to encourage tenants in arrears to pay back what they owe? Here are our 11 top tips...
If you haven't already, it's a good measure to contact your tenants first and let them know that you are there to help. If you don't know the details of their financial situation, there's nothing you can do to help them.
Contacting them first can help you to prepare your own finances and reduce the shock impact of any changes to your rental income. By showing your tenants that you are approachable and friendly, you can build a stronger relationship and increase the chances of them paying back what they owe.
The Covid-19 pandemic has been an unexpected and challenging period for everyone for a variety of reasons. Therefore, if your tenants are having trouble financially, it's important that you are sympathetic and do everything you can to help.
What's more, remember to take people's health into account. If your tenants are sick or unable to work due to Covid-19, this is likely to impact their ability to pay rent.
Dealing with rent arrears can be daunting and stressful for landlords, particularly if you are relatively new to the market. By working with an experienced letting agency, you can have the peace of mind that they are handling all communications and have the systems in place to manage rent arrears effectively.
The best letting agents are well-versed in communicating with tenants and will have various strategies in place to encourage them to pay their rent and reduce their debt.
Encouraging your tenants to organise standing orders is a simple and effective way to reduce rent arrears. It stops tenants withholding rent and means they don't have to remember to pay you every month.
Meanwhile, recording all details of payments digitally can provide you with a clearer picture of who owes what and how your overall portfolio looks. It also provides you with a clear paper trail if you need to provide evidence at a later date.
Although it's important to speak to your tenants regularly, when agreeing conditions around the tenancy, you must make sure everything is followed up in writing.
This provides you with evidence if you need it in the future to prove something that has been agreed. These days, contacting your tenants in writing via email, text or WhatsApp is perfectly acceptable.
When some tenancies are signed - particularly those involving students - a guarantor is named as someone who will be liable to pay the rent if the tenant defaults.
If your tenant is in arrears, now is the time to contact the guarantor and make them aware of the situation. They are likely to be a close friend or family member, so they could be in a better position to encourage the tenant to pay up, especially if their own money is at risk.
If your tenant is having difficulty paying their rent, it could be beneficial to explain to them the various options for financial support which are available.
These include Universal Credit and the Self-Employed Income Support Scheme, which could help them to pay back some of what they owe.
As with all parts of the lettings process, communicating effectively with tenants is vital. For example, keeping tenants up to date with their payment schedule can help them to keep track of what they owe.
Meanwhile, having in-person conversations with renters can help you to come to a solution together, but always follow it up in writing! During uncertain and tricky times, it’s important that landlords, letting agents and tenants work together.
If rent arrears are starting to become an issue for your portfolio, you'll need to speak with your insurer. Finding out if your policy includes protection for rent arrears or future legal costs is key, while knowing the excess of the insurance policy will also prove useful.
Moreover, you could benefit from speaking to your mortgage lender. If you haven't explored this option already, they may be able to offer you a buy-to-let mortgage payment holiday if your tenants have been affected by Covid-19.
If your tenants are struggling to pay rent, one of the most effective things you can do is to agree a repayment plan with them. Not only does this provide you with more clarity about when you might be receiving money, but it helps the tenant to organise their finances.
What’s more, repayment plans help to build up trust between both parties and allow tenants to pay back at least some of what they owe so the landlord is not completely out of pocket.
Dealing with rent arrears can be frustrating, but it is important for you as the landlord to remain professional and respectful of tenants at all times.
Do not bombard renters with phone calls and always remain polite and courteous in all correspondence. As always, a professional letting agency can help to manage the relationship with tenants on your behalf.
We hope these tips help and contribute towards reducing the impact of rent arrears on your portfolio. If you require further guidance or advice, please don’t hesitate to get in touch with us.