Why you really should consider taking out rental payment insurance

Most landlords hope that their experience of letting a property is a positive one but, whether you are a seasoned landlord or a first timer, there is always a chance that, despite your best efforts to choose the right property and tenant, a tenancy might not quite go as planned.

This could be because of a change in the tenant’s personal circumstances, such as relationship breakdown, ill health or unemployment, which means they can’t pay their rent. Or, in the worst-case scenario, it could be that your empty property has been invaded by squatters.

With this in mind, it’s wise for any landlord to consider what they would do in these circumstances and look in to ways to guard against such events.

My tenant has stopped paying rent

Research by Your Move recently found that 9.3% of tenants in rented properties in Britain are in arrears. In some cases this may be due to a change in circumstances outside of their control, but it can lead you to being out of pocket and, because of the lack of rental income, struggling to cover the ongoing property expenses such as repairs and the mortgage.

From the outset, it’s worth talking to the tenant if a late payment is unusual for them. It may be a simple glitch such as an accidental direct debit cancellation, which is easily sorted with the bank.

If late payment is due to a larger problem, such as unforeseen unemployment, now is the time to introduce a guarantor if they haven’t previously had one.

A guarantor is a third party, this is ideally UK based and who agrees to pay the rent if the tenant is unable to. It’s important to ensure that the guarantor understands his or her obligations and the length of time the arrangements stands for.

As a landlord, the reassuring fact is that, if talking to your tenant doesn’t resolve the issues within a few days, you are within your rights to take actionby sending them a formal demand by post.

It is better to explain what happens next if there is a failure to pay the rent and direct them to where they may be eligible for help – for example this could be to a family member who is prepared to act as a guarantor and be party to the tenancy agreement or depending on the situation, could be housing benefit to tide them over. 

I want to repossess my property due to rent arrears

If your tenant has gone into arrears and, despite your best efforts, there is no way of resolving it, it’s probably time to end their contract and find someone more suitable.

If you are midway through a tenancy contract, and your tenant is in breach of one of more of the tenancy terms (which may include being in arrears for two months or more) you can apply Section 8 of the Housing Act 1988.

If successful, Section 8 will lead you to receive the outstanding rental payments and possibly gain possession of your property. But this isn’t always guaranteed.

If tenants can prove to the judge that they can resolve the issue, the judge may grant a suspended possession order which gives your tenant time to get ‘back on track’ and comply with the terms of the suspension.

If the fixed term on the contract has already ended, you can issue your tenant with a Section 21 notice under the Housing Act 1998. This gives you automatic possession without having to give any reasons for the repossession.

Before issuing notice due to rent arrears, you should carefully consider which route to use.The length of time left on the tenancy will play a big factor

My tenant won’t leave

A tenant not leaving your property when agreed is a nightmare, particularly when you have refurbishments planned and new tenants lined up, or you are hoping to move into the property yourself.

Following a Section 21 notice being served, legally a tenant is entitled to stay in the property until they are evicted through the courts.

There are several reasons why a tenant may choose to stay in the property and, in some cases, the tenant may choose to wait until they are legally evicted so they are classed as unintentionally homeless and can receive support from the Local Authority. 

Another option is an accelerated possession service with a cost around £525 plus VAT. This can be used if your tenant has not left by the date in your Section 21 notice.

Although it’s a quicker process as you don’t have to attend a court hearing, you cannot apply for one if you’re not claiming rent arrears. It’s also important to bear in mind that fixed-term tenants can’t be evicted until their tenancy agreement ends. 

Whilst this can be expensive and incredibly frustrating, it’s paramount that you don’t enter the property without the consent of the tenant. Whatever you do, do not enter the property and change the locks as the tenant will be able to bring a claim for unlawful eviction. 

I’ve got squatters

If someone has trespassed onto your property and is now living there, act quickly!

First call the police and proveyour ownership documents of the property so they can remove the squatters, particularly if they moved in recently. If that’s unsuccessful, you will have to begin court proceedings through a solicitor.

An Interim Possession Order (IPO) is available where action is taken within 28 days of discovering the squatters’ presence. Courts usually consider applications within five working days and if granted you must serve the court papers and IPO on the squatters within 48 hours. The squatters must leave the property within 24 hours, if they refuse to they are committing a crime.

After an IPO is made, a second hearing takes place where the occupants are entitled to attend and state whether they believe they have a legal right to the property, however it’s very rare that squatters will do this.

If the court is satisfied that the landlord is entitled to possession, a Summary Possession Order (SPO) is granted. Once granted the court bailiff will evict the squatters, however this can take several weeks.

Once you’ve regained possession of the property make sure you change all locks and ensure that it is properly secure. Having squatters is expensive, but unfortunately costs can’t be awarded against unnamed defendants and so are usually uncoverable. It’s therefore vital that you move quickly to reclaim your property.

How can I protect my property from a rental nightmare?

Despite all these potential nightmares, renting out your property can be straight forward and a great experience for both you and your tenant.

Being confident in your rights as a landlord is key and why many landlords decide to take out insurance policies, such as Rent Protection Polices, which can help protect you from not onlyloss of rental income but legal expenses cover.

As with any insurance policy, it’s important to make sure you know what is covered and how much the excess there may be to pay should you need to claim.

Ideally you want a policy that offers rent protection for non-payment of up to 12 months’ rent, help with paying legal expenses for possession of your property and the costs of alternative accommodation if your tenant hasn’t vacated by the agreed date and you want to move into the property.

With average possession fees running at around £800, and the changes made to The Immigration Act in December last year, where you may have to issue notice, these legal costs should be included.

No-one can predict the future; and despite the best intentions of you and your tenant, it’s an unfortunate fact that sometimes not everything goes to plan. This is why considering now what you’d do if the worst should happen is well worth doing.

Valerie Bannister is the head of letting at Your Move. 

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