Those property owners who buy to let have many reasons to be happy the way this sector currently stands. As less and less people find themselves unable to get onto the property ladder, the demand for rented property has soared. Landlords have cashed in on the state of the mortgage market and snapped up many properties cheaply.
Despite it all currently looking rosy for landlords, it could easily all go wrong. While it is currently a perfect time to be a landlord, we know from experience that once the investors in a particular sector get over confident they can lose their grip. A major concern that is currently and quickly spreading across the UK is the problem of rent arrears.
Employers across the land are having to make redundancies, whilst others are suffering pay freezes, causing many renters so suffer financial difficulties. Their income shrinks or stays the same, while everyday prices such as energy bills, foods costs and general living expenses continue to rise at an alarming rate.
‘Take all these factors into consideration, and throw huge debt into the mix as well and it’s easy to see why British families are struggling to pay their rent. According to ARLA, the Association of Residential Letting Agents, there is evidence proving that UK renters are struggling to manage t heir household finances and the last quarter of 2010 saw the first noticeable increase of rent arrears,0.5%, in over 18 months.
When a tenant fails to meet their rental commitments, the landlord’s personal finances can seriously suffer. Many of these properties are mortgaged and the landlord relies on the rental income to cover his mortgage payments, so no rent means having to cover their commitments out of their own pockets.
The simple fact is that new landlords make little profit from their properties in the first few years, as the rent pays the mortgage. If arrears rise to a serious level, the landlord faces the risk of repossession, so it’s vital that if you are a landlord who has tenants that are unwilling or unable to pay their rent, you know your rights.
A legal binding contract from the outset, signed by both landlord and tenant, clearly stating the terms of the rental and the legal implication they face if they do not make their regular rental payments is vital.
If a tenant fails to make several payments, a formal reminder of the legal obligation they entered into is a good idea. Written correspondence is best as you can keep copies, and present them should the matter end up in court. These, like the contracts, can also be downloaded online.
Next, you may consider your options with regard to removing the tenant from your property. There are 2 options here, as laid down in section 8 and section 21 in the Housing Act 1988. If they have an assured shorthold tenancy agreement, and are still within that fixed term, you will have to issue a section 8 notice.
In order to proceed with the repossession you must stipulate the legal grounds you will be proceeding on. As long as a court believes that your claim is fair and justified, you will be issued with the repossession order that allows you reclaim the property from the tenant.
The process involving section 21 should be a lot simpler, and this is the approach favoured by most landlords. This legislation deals with tenancies where the rental period has expired, as has the tenancy agreement and no new contract has been signed.