An expert landlord's guide to successfully recovering rent arrears
Success in any business always depends on your ability to adapt to difficult situations and find ways of cracking seemingly impenetrable nuts.
In the buy-to-let game one of those nuts is the pursuit of rent arrears, but landlords might be surprised at how successful the right approach to this problem can be.
I can recall evicting a tenant from a block of apartments and on the day of the eviction he was literally sat on a chair in an empty room eating a KitKat - obviously feeling quite smug that he had dragged out the repossession for weeks and believing he wouldn’t pay a penny back.
But six weeks later he was on a payment plan paying a £100 per month and we collected the debt in full. I suspect many would have taken one look at him and written the debt off.
The reality is that, as a landlord, at some point you are likely to experience a situation in which either your tenant does not pay their rent or they vacate your property with rental arrears.
I make it a rule within my business to pursue each and every tenant in rental arrears - not only is that pertinent to cash flow but it’s also the right thing to do.
Many landlords will choose not to and they are often right not to – but they should know that there are ways of going about it which actually work.
Does the amount of rent arrears justify pursuing it?
Firstly, it means spending some money to begin with, so you need to decide early on in the process if it’s worth pursuing. I would suggest that if the arrears are over £600 – and this can include damages if the tenant has left the property – and the tenant is working or has valuables such as a car or other assets, then its definitely worth pursuing.
The first step is to get a county court judgement (CCJ) for the debt. You can do this yourself quickly and easily using an online government service called Money Claim Online.
This is effectively an online court service where you can submit your claim.
The fee is a sliding scale depending on the size of the claim. Typically, providing the Tenant does not try to defend the claim, you should receive confirmation of the CCJ within around 21 days. If you are not comfortable doing it yourself then there are plenty of online companies that offer this service as well as high street solicitors for around £100.
Use high court rather than county court bailiffs for rent arrears
The next step is key - it's all about the enforcement.
Typically landlords try to enforce the debt by deploying county court bailiffs or even by applying for what are known as attachment of earnings orders, which is where the urban legend of getting paid back at a rate of £1 a week originates.
My tip is to use a high court bailiff service for collection once you have your CCJ. The Sheriff's Office for example, will transfer the CCJ to the high court who will arrange what is known as a ‘writ of control’. Once you have the writ then the high court bailiffs will carry out enforcement work for 12 months to collect the debt, the cost of which is added to the total debt and paid for by the tenant.
They are very successful at collecting debts as they have enhanced powers over and above standard county court bailiffs which makes this route much more effective.
From my own experience I have had some pretty fantastic results taking this approach, ranging from tenants setting up payment plans of £50 a month to full settlement of around £2,000.
Tenant debt is one of the hardest debts to enforce against and collect but in my experience this approach will increase your chances greatly.
As a landlord it’s doubtful your property business just fell at your lap and you’ve probably had to work hard for it, so don’t let arrears go unless it’s really not worth your while pursuing them.