Recovering rent arrears from residential tenants who have vacated the premises without leaving a forwarding address is one of the main concerns landlords face after obtaining a possession order. 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.
This blog covers 2 of the most frequently asked questions I receive from landlords.;
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 others 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 to.
Cost to you: Court fee of £66 (recoverable from tenants) and £75 plus VAT if the Bailiff is not able to recover sums owed after three visits.
• transferring case to High Court and obtaining writ of control – 1-2 weeks
• 7 day letter from bailiffs to tenants
• up to one to two months after that depending on how many visits required.
You will typically have 4 months from serving the demand to apply to bankrupt a private individual and the debtor will have 18 days (if based in the UK) from service to challenge the notice and seek for it to be set aside. Individual debtors who apply successfully to set aside a demand are often able to recover their legal costs, so care needs to be taken to ensure this is used properly.
Previously we acted for a landlord in her early 80s who had the benefit of a charging order made against a former tenant over 20 years ago. On this occasion, after getting back in touch with the former tenant, they ended up paying the rent arrears of £2500 plus interest of around £10,000 that had accrued.
I have covered above the most popular routes landlords take in order to recover sums due to them. There are other options such as third party debt orders which can stop tenants taking money out of their bank accounts or allow you to recover from someone who owes the tenant money. You can also apply for an attachment of earnings order which allows you to take payment directly from the tenants’ wages to pay the debt owed.
Paris Smith Property Litigation Team is regularly instructed by both private and commercial landlords to recover possession and outstanding debts from tenants. For more information about landlord and tenant matters please contact Nicola Davies.