Don't pay the price

Andrew Strange finds out what landlords should do if tenants are unable to pay the rent in a tough economy

Andrew Strange

“If a tenant will not pay the rent and no agreement can be reached, the next step is to serve a Section 8 notice.”

unemployment is likely to rise in the current economy and some tenants could find themselves struggling to pay their rent. Landlords need to know how to handle such situations, both to help the tenant and ensure they can cover their mortgages.

John Coyne is a landlord with 44 London properties and an advisor on the National Landlords Association’s advice line. In 10 years of letting he has only evicted one tenant for non-payment but believes the situation is changing, with decent, well-meaning people sometimes finding themselves unable to find the rent.

He says: “My view is that it is always better to reason and negotiate with tenants. If they are genuinely struggling and can’t pay, you may be able to come up with an agreement where they pay, say, 80% of the rent. After all, 80% is better than no rent at all.”

However, if no agreement can be reached and the tenant refuses to leave the property, you can serve a Section 8 notice when two months’ rent is lawfully due and unpaid, according to the contract. This gives them 14 days to pay up, vacate or address the situation. If they don’t, the landlord can then issue legal proceedings at the County Court.

To do this, an N5 Claim Form and an N119 Particulars Claim Form must be completed and handed in to the County Court closest to the property with a fee of £150 (at the time of writing). The fee can be recovered from the tenant.

It is then usually between six and eight weeks before a possession hearing is held. If the rent is still outstanding, the court can give the tenant up to 42 days to leave the property but often gives them just 28 days. The second part of the court order awards the rent to the landlord.

If the tenant refuses to leave, and is still there after the date set by the court passes, the landlord can then get a Bailiff Order and the bailiffs will enforce the court’s decision.

John says: “There is a bit of a myth that, once the court has said the landlord is owed the rent, they will get it. But once the court has said the money is owed, it has done it’s job and its up to the landlord to pursue it.”

If the tenant is employed by a limited company, one way of doing this is to apply for an Attachment of Earnings Order, which forces the company to pay the landlord straight from the tenant’s salary. If you know that the tenant has money in their bank account, a Third Party Charging Order is another possibility. This ensures that the bank takes the money from the tenant’s account and pays it to the landlord.

But John says: “If the tenant can’t pay the rent, you can get all the court orders you want — they still won’t have any money.”

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