Tenants in arrears

The latest (January 2014) figures from the Tenant Arrears Tracker, produced by LSL Property Services, show that 67,000 households, or 1.6 per cent of all tenancies in England and Wales, owe more than two months’ rent. This is an increase of 3.4 per cent in three months, although, overall, the numbers in arrears is still much lower than in the same quarter of 2012.

“Today’s biggest risk for the private rented sector is a small minority of tenants who are struggling with several months of unpaid rent.” David Brown LSL Property Services

This overall improvement has helped landlords reduce their mortgage arrears, which have fallen for the fourth quarter in a row and are now at the lowest arrears level since 2008.

David Brown, Commercial Director of LSL Property Services, says, “Today’s biggest risk for the private rented sector is a small minority of tenants who are struggling with several months of late rent. This proportion is shrinking but remains a serious concern for some landlords.”

However, these are general figures, not LHA tenant specific, and figures on LHA tenant arrears in the private rented sector as scarce to say the least. The DWP’s evaluation report on the Pathfinder (initial) areas of Universal Credit found that the “overwhelming majority” of tenants in receipt of direct payments were not accruing serious arrears of rent.

This report also found that the proportion of landlords reporting arrears over the Pathfinder period did not vary between Pathfinder and Control LAs (65 per cent). However it was more common for Pathfinder landlords/letting agents to think that LHA recipients were more likely than HB tenants under the previous arrangements to fall into arrears.

Universal Credit

According to Makeurmove.co.uk, an online letting agent, Universal Credit remains largely misunderstood. Their new research, sampling 300 landlords in December 2013, reveals that one in three are unaware of Universal Credit, while 40 per cent have heard of the scheme, but are unclear about the details. Just 27 per cent of landlords say they fully understand it.

Richard Francis, Director of Makeurmove.co.uk says, “Clearly, there is confusion amongst landlords and many are still in the dark about universal credit. Landlords fear that under the new scheme, housing benefit will go directly to tenants and hence bring an increase in rent default, prompting many landlords to say they are not going to support housing benefit.

“Yes, Universal Credit will mean money is paid monthly rather than weekly, with an emphasis on recipients learning to budget properly, but the latest Department for Work and Pensions (DWP) plan would keep the system under which rent goes directly to a landlord after two (months) missed payments, while adding a review after a first month’s default.

“Currently, private landlords accommodate one million people who have part, or all of their rent paid by the state. The LHA market is growing, with 310 people turning to the government for housing benefit, every day, to keep the roof over their heads. More private landlords are needed to accommodate the growth in LHA tenants and unless landlords can be reassured about universal credit, this is going to be a major problem for government.”

Ending a tenancy

The National Landlords Association (NLA) says that the vast majority of tenancy terminations are driven by the tenant’s desire to move on but there may be times when a landlord needs to end the tenancy or seek possession of it. The NLA describes the two options open to the landlord:

Landlord’s Options

1. Section 21 (s21) Accelerated Possession Procedure

This route gives the landlord the right to possession at, or after, the expiry of the initial fixed term tenancy period. It is imperative to note that they are not automatically entitled to possession upon expiry of the tenancy and they must serve this notice on the tenants at least two months before you wish to claim possession.

Taking this route means that there may be no need for a court hearing; this is likely to cause less hassle as providing they have correctly served the s21 notice the court must grant a possession order in their favour. However, the court does not have the power to make a money judgment under this route, which means it cannot order the tenant to repay any rent in arrears, for example.

2. Section 8 (s8) Standard Procedure

This route gives you the right to possession if particular terms of the terms of tenancy agreement have been breached. The length of the notice will vary upon the grounds you’re using to seek possession; there are 17 different grounds and the most common ground is due to rent arrears. If you chose to serve a s8 notice it also allows for a money judgment to be obtained along with an order for possession.

Bear in mind however that s8 proceedings can often be lengthy as they are likely to be defended by the tenant, so the nature of the breach of tenancy will be important.

If both situations apply

Where both routes apply – such as when the tenancy is ending and the tenant is also in arrears – it may be advisable to use the simpler and quicker s21 route, as faster possession will allow the landlord to re-let the property sooner. However, regardless of your chosen route, remember that the landlord must have served the appropriate notice on the tenants before any court proceedings can commence.

Claiming possession of property can be a costly and stressful process for all involved. However, in situations where a tenant is unable to pay the rent for prolonged periods of time, the landlord will need to consider bringing the tenancy to an early end, rather than risk defaulting on your mortgage payments following an extended period without receiving rent.

What happens in court?

Paul Shamplina at Landlord Action explains the following:

Section 8 proceedings

“If a landlord relies on the rent to pay the mortgage then it is imperative that the landlord acts quickly to minimise losses.” Paul Shamplina Landlord Action

Where a claim is for possession and rent arrears (Section 8), there will be a Court hearing before a Judge. The landlord will be required to attend the hearing, or appoint an agent to attend on their behalf. The landlord or agent must be fully conversant with the tenancy and have all relevant paperwork readily available, such as the tenancy agreement and an up to date schedule of arrears at the hearing.

If the tenant clears the arrears prior to the hearing date, it is unlikely a landlord will get a Possession Order.

If the claim is successful, the Judge usually grants a 14 day Possession Order; this means the tenant has 14 days from the date of the hearing to vacate. In the event the tenant does not vacate, the landlord will be required to appoint a bailiff to carry out the eviction. In addition, a Judgement for the arrears of rent may also be granted at which point a landlord may also make a claim for interest and costs.

Paul says, “If the tenant is at the hearing and pleads exceptional hardship, they may persuade the Judge to grant longer before leaving. The most a Judge can give is 42 days. We always oppose this as we believe the hardship to be in the landlord’s favour.”

EXCEPTIONS

If the tenant reduces the arrears to below two months, the Judge may order a postponed Possession Order (provided grounds 10 & 11 have been included in the Section 8 notice), which means the landlord would get a Possession Order, but the tenant is permitted to stay provided he/she continues to pay the rent each week/month on time and clears the arrears by an agreed and reasonable time. Failure to adhere to the order would mean that the landlord can apply for a Baili to execute the warrant of possession i.e. evict the tenant(s).

It can be a stressful and costly process to gain possession of a property.

SECTION 21 PROCEEDINGS

There are two types of Section 21 notices. One notice is served during the term of the tenancy and one is served when the term of the tenancy has expired.

A Section 21 notice is used when the landlord requires possession of the property. The landlord does not have to give a reason for wanting possession of the property and there does not have to be a breach of the tenancy agreement.

Some tenants use a Possession Order under Section 21 to seek housing assistance from their local housing o ce. In this case, tenants are generally recommended by local authorities to remain in the property until a Possession Order has been granted and bailifs have been appointed to evict the tenant.

Where a landlord’s claim is for possession only (Section 21) and he/she uses the Courts’ accelerated procedure, the tenant will have 14 days to fi le a defence. If no defence is filed, a landlord can apply to the Court for an Order for Possession. It can take approximately eight weeks to receive the Order for Possession, depending on the workload of the Court.

There are certain circumstances where the accelerated process will not be able to be used. In such circumstances, a court hearing will be required.

EVICTION – County Court Baili

If a tenant fails to vacate on or before the expiry of the Possession Order (usually two to six weeks), a County Court bailif must be appointed to carry out the fi nal stage, eviction. Applying for a warrant for eviction can mean the process takes a further six weeks. The eviction can only be carried out by a County Court bailif .

GET THE BEST ADVICE

Landlord Action
Paul Shamplina has been in the eviction business for over 25 years. His company, Landlord Action, originated the three-step fi xed fee eviction process, helping landlords with problem tenants. www.landlordaction.co.uk

Landlord Law
If landlords wish to avoid the expense of using solicitors, landlords can use the DIY Eviction service of www.landlordlaw.co.uk/eviction which will help them bring a claim through the courts.

National Landlords Association
The NLA is currently running its Effective Letting Campaign and o ers free best practice forms, including a landlord’s and tenant’s guide to rent arrears, and advice on ending tenancies, all available from www.landlords.org.uk.

Shelter
Shelter has comprehensive information on its website, sometimes seemingly in favour of the tenant but all useful information when a landlord is having trouble with a tenancy.
www.shelter.org.uk