Managing rental arrears in 2023 is probably something that should be high on your list of priorities. But it can be a challenging task and requires a proactive approach. So what can you do to prevent rental arrears from happening and how can you effectively help tenants make on time payments? And therefore not take any legal action. Here are our top tips on how to effectively manage rental arrears:
1. Check your tenant reference
Once you get back your tenant referencing report - be sure to check it carefully, especially the affordability check. It could surface red flags - that indicate the tenant's income is not high enough for them to afford the monthly rent. And instead you could consider offering the tenant a different property that suits their affordability levels.
2. Ask for up front payments
Another way of ensuring that you get paid on time is to ask for an up front payment. This is very common for overseas tenants and those with a bad or non-existent credit history. It’s not uncommon to ask for 6 months upfront for example.
3. Create a rental arrears policy
Create a detailed policy that outlines expectations and consequences for tenants who are in arrears. This should include a timeline for payments and any additional fees or penalties.
4. Offer flexible payment plans
If you can afford to, offering tenants a flexible payment plan means you're still getting your rental income - just that it’s a bit slower than normal. And think about the good you’re doing - helping to keep a roof over someone's head!
5. Use a guarantor service
Using a guarantor service not only helps the tenant in securing the property they are after, but it also covers you as the guarantor service is liable for rent arrears should they arise. We work with industry leaders Housing Hand who act as the individual’s guarantor, which means that the risk sits with Housing Hand, and not with the landlord. 100% of rent is covered 100% of the time,
6. Get tenants to set up a standing order
Sometimes even the most organised of persons can forget things - so asking for a standing order to be put in place can help ensure on time monthly rental payments.
7. Take out a Rent & legal protection policy:
Another option to consider is taking out a rent and legal protection policy. We’ve teamed up with Alan Boswell Group (ABG) to provide one of the market’s leading rent guarantee products for letting agents. The Alan Boswell Legal Expenses and Rent Guarantee Insurance (LERG) is backed by industry heavyweight, Aviva, For more info click here.
8. Communicate with tenants:
However at the moment - perhaps the most important tip is to keep in regular contact with your tenants. Check in with tenants and remind them of their obligations to pay rent on time. And if they are struggling, help them seek advice from organisations such as Citizens Advice Bureau or step change.
Managing rental arrears will no doubt be difficult, but with a proactive approach and clear policies in place, you can protect yourself as a letting agent/landlord and ensure tenants are paying their rent on time.