Recovering rent arrears from residential tenants – Part 1 of 2
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Recovering rent arrears from residential tenants – Part 1 of 2
One of the main concerns landlords face after obtaining a possession order is how to go about recovering sums owed from former tenants once they have vacated without leaving a forwarding address. With court fees amounting to nearly £500, landlords can end up spending several thousand on legal fees plus months of rent arrears before a bailiff can be appointed. My next two blogs will cover two frequently asked questions by landlords:
- What chance do I have of recovering the rent arrears; and
- What enforcement steps you can take to recover sums owed to you.
Paris Smith’s Property Litigation team is regularly instructed by both private and commercial landlords to recover possession and outstanding debts from tenants who refuse to leave and refuse to pay. We are all too familiar with the plights of private landlords who rely upon rental income to pay the mortgage or commercial landlords needing to maintain a robust stance against arrears to deter other tenants from following the same path.
Q1 – What chance is there of recovering the money judgment from former tenants?
Tenants do not have an incentive to pay money judgments attached to possession orders once they vacate as, unlike straightforward money claims, they are not automatically recorded against their credit score as county court judgments “CCJs”. It is only upon taking enforcement action or applying for default judgment that the tenants suffer any damage to their credit record. This point is also relevant to landlords when undertaking those all important reference checks on new tenants.
First check – Who’s liable?
Tenants will be jointly and severally liable for the rent arrears meaning you can recover all the sums due from only one of the tenants leaving them to chase the other for their share. This could prove valuable information if you find out one of the tenants (whether they were in occupation or not) is worth pursuing more than the other.
Guarantors might be your first port of call as often they will be better able to pay the judgment debt. Check what the terms say in the tenancy agreement or deed of guarantee as often it says the guarantor is only liable if he has been given 14 days’ notice of the arrears not being paid. If this is the case fire off a letter straight away and if it is not too late add them to the possession proceedings so that you can secure a judgment against them.
Next check – Pre-sue report
The chance of recovery depends mostly on locating the tenant/guarantor and finding out if they have any assets and/or the ability to pay the judgment. Here we usually employ a specialist company to prepare a formal report for around £30 that summarises for us the finances of the debtor and often their whereabouts too.
In summary:
- Tenant with assets that can be located = high chance of recovery
- Tenant with no-assets that cannot be found = low success rate – You have 6 years to enforce the possession order and so you may prefer to wait to see if the tenant’s position changes and undertake another pre-sue report in a years time.
My next blog looks at what enforcement steps you can take to recover possession. You can read that blog here. For more information about landlord and tenant matters please email me.