Ways to Avoid Payment Problems

Sunday 29 March 2009

Amateur landlords begin to panic as ¾ of National Landlords Association (NLA) members are expecting to drawn in rental arrears during the next 12 months. Experts predict that by the end of the year of 2009 the number of unemployed citizens might reach 3.4 million that is, 1 out of 10 adults. Such high levels of unemployment are very likely to result in thousands of missed payments. Almost half of the million buy to let investors in the UK manage the tenants themselves rather than hire a letting agents. 30% of the landlords are already having problems with tenants as the NLA has registered an increased amount of telephone calls to its helpline on how to deal with tenants in arrears. The chair of the NLA, David Salusbury, said landlords clearly understand that they might face problems associated with missed payments in the next 12 months and that is why now landlords have to do everything possible to ensure that their tenants are not and will not be in arrears. Problem tenants might bring even more headache to inexperienced landlords who have just flooded the rental property market with houses and flats that cannot be sold. Here is a list of things a landlord can do to avoid payment problems. - Default If the payment is already late, the landlord should call the tenant to ensure that the check is on its way. The key is to act quickly and contact the tenant immediately should the problem occur. NLA advisors believe that it is possible to learn whether there are more substantial problems from a simple conversation with the tenant. If the landlord has contacted the tenant but the payment does not arrive for another 2-3 weeks, the landlord has a right to visit the tenant at home. However, it is now against the law for the landlord to harass the tenant or remove his/her possessions. If the tenant is 2 months in arrears, the landlord should issue a mandatory arrears notice or take court actions, which is considered last resort. - Disappearance Even if the tenant disappears, the tenant agreement still continues. The landlord should undertake all possible efforts to contact the tenant, his guarantor or next of kin. The landlord does not have a right to remove tenants possessions or change the locks. - Prevention It is advisable to get recommendations that clearly state that the tenant has not had payment problems before. One should be a letter from the employer, the other a letter from the previous landlord. Also, the landlord can require the tenant to provide 2 financial guarantors (usually, parents, friends or employers) who will cover the debts in case the tenant fails to do so. Landlords have a right to visit the property once in 3 months to ensure it is kept in a good condition. It is highly suggested that landlords buy BTL insurance, which protects against various risks. The landlord can pick and choose between different insurance policies and prices. In general, buy to let insurance would offer rent guarantee as well as legal protection. Finally, landlords can hire letting agents, which also offer rent guarantee. Letting agents services usually cost somewhere between 5-15% of annual rental income. As the financial crisis is deepening, landlords should take as many preventative measures as possible to avoid serious payment problems.