Tenant engagement is key to tackling rent arears

As regular readers of this blog will know, our advice to clients with tenants in arrears is to engage with them as fully as possible, try and put a repayment plan in place and keep the lines of communication open.

With seven million people around the country now living with additional lockdown restrictions as a result of the pandemic, we can expect to see arrears rising in the areas where businesses have been forced to close or to reduce their opening hours. The Government has put a stay on bailiffs taking action to evict tenants in Tier 2 and 3 areas in order to protect tenants from being made homeless. It’s important for tenants to appreciate that despite the fact that we are living through a health crisis, they are still legally obliged to pay their rent. Landlords should try and make arrangements with tenants for them to pay as much as they can manage even if they are finding it hard to find the full amount. With this in mind Insurance firm CIA suggests a couple of ways for landlords to deal with the problems thrown up by tenants who are struggling to pay their rent.

Rent deferment: this is where the landlord agrees not to charge rent for an agreed period of time, at the end of which the amount that has been deferred is paid back in monthly instalments over a specified period. CIA advises that if landlords decide to go down this route, they should keep clear records of the arrangement in case they need to prove the details at a later date.

Rent abatement: this is a similar arrangement to deferment but the tenant does not have to pay back the rent owed. Some landlords offered this as a short-term option to tenants during lockdown for the simple reason that a tenant continuing to pay their utility bills and whatever rent they could afford was a better option for some than the prospect of maintaining an empty property and going through the process of re-letting.

Another important point raised by CIA is that even if a tenant has stopped paying rent, landlords need to be squeaky clean – so don’t stop fulfilling your obligations under the lease just because your tenant isn’t playing ball. If you do need to take legal action against your tenant, it will go in your favour if the Court can see that you have made every attempt to be reasonable and to make concessions where possible. Another idea suggested by a landlord this week, is to waive the remaining term of the tenancy and to agree with the tenant to keep their deposit in lieu of the rent owed and in exchange for them moving out. No eviction process to worry about, no impact on the tenant’s credit rating – and a quick, simple resolution for the landlord, enabling the property to be re-let as soon as possible.

Where there is no long-standing relationship between landlord and tenant and neither party has a vested interest in retaining the tenancy, this may prove to be the quickest – and easiest solution all round. However, landlords should take note that any arrangements to cut short a tenancy must be agreed between the landlord and the tenant – even the slightest hint of coercion or harassment could end up in a costly court case. In our experience, landlords have suffered as much as tenants in the last few months. By and large most are reasonable and simply want to keep an income flow to meet their obligations. Where the parties engage, amicable solutions are usually found.