Rental arrears – or the potential for rent arrears – are the bane of every landlord’s life, to the degree that in recent years many have changed the profile of renters who they’re willing to let property to.
Earlier this year the Independent reported on research carried out by Sheffield Hallam University, which revealed that 32% of landlords said they “actively sought to decrease lettings to under-35s over the last three years”, while two thirds said they would be unwilling to let to young people in receipt of housing benefit or universal credit. Overall, 79% said that they had decreased lettings to under-35s because of a higher risk of rent arrears.
Preventing the risk of arrears
So, what measures can landlords take to minimise the risk of tenants falling into arrears with payments?
One solution is direct debit, which compares favourably with other rental payment methods such as cheque, standing order or other manual payments made by the tenant (for example, through online banking).
Once a direct debit authority is set up, you can collect the rent directly from the tenant’s bank account on the date it’s due. Straight away this reduces the administrative burden that comes along with other payment methods, such as banking cheques or chasing overdue payments.
Many landlords don’t even realise that they can access the direct debit system, but third-party payment processors make it easy and straightforward to set up and manage payments. Fees tend to be minimal and for many who use direct debit the slight cost is more than made up for by the added convenience and time saved.
Giving you more control over your income
One of the key advantages of the direct debit system is that it puts you in control. If you are increasing the rent amount, for example, you can do this directly by altering the direct debit, rather than relying on the tenant to change their standing order or other method of payment.
Under the terms of the direct debit scheme, you just have to give written notice a minimum of three working days in advance of any change to the amount, date or frequency.
So how do you convince tenants to make payments by direct debit? The truth is that, while direct debit puts you in control of collecting payments, the payer also benefits from the scheme’s convenience, transparency and protections. They have the peace of mind of knowing that their rent will be paid in full and on time every month without them having to lift a finger – the funds will just be debited automatically from their bank account.
Getting tenants on-board
Some tenants may be reluctant to commit to paying by direct debit, feeling that it gives the landlord carte blanche to take any amount out of their account whenever they want. In fact, customers who pay by direct debit are fully protected by the Direct Debit Guarantee.
Direct debits can offer convenience and peace of mind to both parties involved, for relatively little cost. If rent arrears are a pressing problem for you as a landlord – or even if you’re just fed up having to chase those payments that are always two or three days late – then consider exploring direct debit rental collection as a solution to your concerns.
By Sam Pollard of London & Zurich.