Rent collection: DIY vs managed

Making sure your tenant pays their rent on time and in full every month is one of the most important tasks in the job of letting and managing property.

Rental income is the beating heart of your property investment and should be enough to cover any mortgage payments and regular maintenance costs, while leaving you some profit on top.

For many landlords, even just one or two months without rent coming in can put them in a sticky financial situation – whether that’s because they have to then subsidise Buy to Let mortgage payments out of their own funds, or they rely on the rental profit for their own income.

That’s why it’s so important an agent or landlord:-

1. Carries out thorough referencing and credit checks before accepting a tenant, to be as sure as possible that they can afford the rent, and
2. Checks on the day rent is due that it’s been received
3. If payment hasn’t been made, contact the tenant to find out why and then take the most appropriate next steps:
   1. If it’s a bank error or the tenant has simply forgotten to pay, it should be easy to put right.
   2. If they’re in short-term financial difficulty, you may be able to agree a payment plan
   3. If it appears they can no longer afford the rent or they’re wilfully not paying, you may need to move to eviction.

Challenges for DIY landlords handling rent collection themselves

• It’s easy to forget to check on the day rent is due, especially if you’re busy or on holiday.
• If a tenant is struggling to afford their rent, you need to be understanding and handle the matter diplomatically, but make sure you don’t let things slip for too long.
• Although ‘bad tenants’ are rare, you have to tackle persistent non-payment in a specific way, so that you stay on the right side of the law and are able to evict them if necessary.
• Regardless of how much the tenant owes, or whether they are ignoring your attempts to contact them, you need to understand that you cannot harass them – and where the legal line is.

And it’s important to know that if you violate the tenant’s rights or handle any part of the rent collection and debt recovery process incorrectly, you may be unable to proceed with an eviction and the tenant could even pursue a legal claim of their own against you!

This is why it’s well worth considering using an agent, like ourselves, to deal with rent collection on your behalf.

The benefits of using professional rent collection services

• Letting and managing agents are doing the job every day and have systems and processes in place to ensure their landlords are paid on time and in full.
• If tenants are late making payment, they will be contacted and followed-up.
• Experienced agents are skilled at communicating and negotiating with tenants and should be able to spot any ‘red flags’ in their explanation as to why payment has not been made.
• If the tenant has to be evicted, your agent should work with you to ensure the process is handled properly – ideally through a specialist evictions company.
• The agent will help ensure the tenancy is brought to an end as soon as legally possible, so a new paying tenant can be moved in.

It’s worth pointing out that the vast majority of tenants do pay the full rent on time each month. However, mistakes do happen and if you don’t address late, incomplete or missing payments right away, it’s easy to lose a significant amount of time and money.

Steps to ensure you receive the rent you’re due

1. When the tenant completes their tenancy paperwork, provide your bank details and request that they set up a standing order for the rent.
2. Make a diary note to check with your bank the day rent is due.
3. If the rent is not received, contact the tenant by phone and send a follow-up email to confirm your conversation in writing.
4. If it’s just a short-term affordability issue, it’s good practice to give the tenant the chance to make up what they owe over a few months. However, it’s important to ask the right questions so you understand exactly what the problem is and when it will be resolved. Make sure you put the payment plan in writing, have it signed by the tenant, and then check that the agreed amount is paid on the stated dates.
5. If the tenant continues to fall into arrears, it may be wise to begin eviction proceedings:
   1. You could serve a section 8 notice, stating the specific ground of rent arrears, but you need to wait until the tenant is at least two full months in arrears. If they refuse to leave by the date on the notice, you will have to go to court to apply for a possession order. In Wales we would serve RHW20.
   2. Alternatively, you could serve a section 21 notice at any time, giving the tenant two months’ notice. If they don’t leave the property, you can then apply for an accelerated possession order, which doesn’t require a court hearing, so this can be a quicker solution than using a section 8/RHW20. In Wales we would serve RHW16 which gives the contract holder six months' notice as S.21 does not apply.
6. Once the tenant has been evicted, you could then pursue them for the unpaid rent they owe. However, it’s often not worth spending the time and money on this – better to simply focus on getting a new, paying tenant into the property as soon as possible.

Our own rent collection service for landlords includes debt control and recovery. If you’d like to discuss this, or if you have any other questions about rent or arrears, we’re always here to help. Get in touch with a member of the team today by calling 01656 657033 or email info@smart-lettings.co.uk