What a Landlord Should Do When Their Tenant Has Fallen Into Rent Arrears

Do you know how to handle a tenant that’s fallen into arrears? This can be a difficult issue for landlords as you have to be careful to remain compliant with all of the relevant legislation throughout your process. Also, many landlords do not have a systemised formula for dealing with these situations, leaving them with the sense that they are unprepared. Today, we’re going to cover some of the do’s and don’ts of chasing rent arrears. We’re also going to discuss which legal notices to use, as well as the process we recommend for handling these complicated situations. 

 

A Tale of Two Tenants

At Concentric we have found that there are two different types of tenants who fall into arrears. There are those who do so against their will who have simply fallen on hard times and cannot pay at the moment. On the other hand, there are those who are capable of paying their rent but refuse to do so of their own volition. The tenants in the latter category are always more challenging to deal with. You need to have a process in place so that whether the tenant falls into one category or the other, you will know what to do. 

 

Dos and Don’ts of Chasing Rent Arrears

As you form your process, we’re going to share with you our recommendations for what you should and should not do in these kinds of situations. First of all, communication is key. You should try to make contact with the tenant as soon as you become aware of the missing payments and see if there is a problem and what it might be. 

You can use these communications to ascertain which group the tenant falls into, and hopefully, work your way to a solution that satisfies all parties. The first step to take when a tenant misses rent for 7 days is to send a formal letter demanding the payment. Then a follow-up letter should be sent again every 7 days throughout the process. During this time, you should also be attempting to contact them through phone or email to see if you can get an explanation and negotiate a plan for payment. 

It is of the utmost importance that you do not harass them. Contacting your tenant every hour of the day is legally defined as harassment and should be avoided. Rather, only contact them at previously scheduled times. 

If a tenant is simply unable to pay, it may be worth making an application to Universal Credit for a direct payment. The great thing about this step is that there is no harm done whether or not the tenant is actually in receipt of payments from Universal Credit. All you need to do is make an application. This can be a way to alleviate the tenant of the responsibility of making the rent payments themselves. 

 

What To Do When They Just Won’t Pay

Speed is of the essence when it comes to responding to tenants who are refusing to pay their rents despite their economic ability to do so. In these cases, we recommend quickly acting to take possession of your property. Ensure that the letters demanding rent are sent promptly every 7 days and then on the 28th day, you should send a notice of possession as soon as you can. You need to take court action as soon as you are legally able to do so. Now, you may be wondering, what is the appropriate notice to send tenants in arrears?

Serving a Section 8 notice is what we recommend, citing the grounds you wish to rely on (usually 8,10 and 11). It is the notice to send when the tenant is in two months of arrears or more. We recommend it because it comes with a 14-day notice period in England and is the quickest way to secure possession of your property in these cases. 

You may have also heard of serving a Section 21 notice to tenants in arrears. This is a valid option. However, the notice period on Section 21 is 2 months long, delaying your ability to deal with the situation effectively. 

 

Final Thoughts

In the end, communication is the most important aspect of responding to tenants who have fallen into arrears. For most tenants who may be struggling with financial difficulties and cannot pay the rent, communication will be a way to understand their problems and negotiate a payment plan that will work for you and them. Unfortunately, most tenants who refuse to pay of their own free will are not very communicative, and legal action is usually required. Comprehending the current legislation pertaining to these issues is important. A helpful resource that we recommend is Gov.UK, a site that will give you the latest guidance as well as information on the legal notices we’ve discussed today. 

Hopefully, this has given you more insight into what to do when a tenant falls into arrears. We at Concentric are dedicated to helping landlords manage their rental properties and have released tons of content that will help and advise you with practical step-by-step guidance on the specific legislation that matters for landlords. 

Visit and Subscribe to our Youtube channel for more legislative updates on how to handle your properties and tenancies in these challenging times.

What Is The Rental And Property Investing Market Like In Liverpool Right Now?

We have let thousands of tenancies, worked with hundreds of investors, and managed hundreds of properties, helping landlords navigate the local Selective Licensing schemes since their inception in 2015.

Like tenants, landlords and investors come in all shapes and sizes, have different levels of experience, and have different wants and needs, but there are a few questions that we get asked all of the time, and right now, it seems like everyone wants to buy property in Liverpool and the surrounding areas... and I can see why.

We have been instrumental in letting property in and around the west of Liverpool for over 10 years now, our focus; to work with the landlord investors in the area.

We have let thousands of tenancies, worked with hundreds of investors, and managed hundreds of properties, helping landlords navigate the local Selective Licensing schemes since their inception in 2015.

Like tenants, landlords and investors come in all shapes and sizes, have different levels of experience, and have different wants and needs, but there are a few questions that we get asked all of the time, and right now, it seems like everyone wants to buy property in Liverpool and the surrounding areas... and I can see why.

There's a lot of investment opportunity in the area with great property prices compared to many other city locations, and will generate fantastic income (and now capital) returns.

So, if you are thinking of buying a property in the area, here are a few questions you should be asking yourself.

 

What are the most in-demand areas from tenants at the moment?

The top areas that are most in-demand from tenants right now are Bootle, Walton & Fazakerly.

 

What sort of property cannot you get enough of? 

There appears to be a real shortage of 2/3 bedroom houses, maybe because people want more space or a place to work from home, we have all experienced being locked in, and a 1 bed flat can become less desirable. 

 

Where are most investors looking to buy at the moment? 

Most Investors are looking to buy property in Bootle & Walton, which ties in nicely with the increased tenant demands we are seeing. 

 

What rent increase levels have YOU seen in the branch? 

With rents across the UK increasing on average by 8.5% (according to Homelet), we have seen rents across the board here increase by at least 10% over the last year and in some cases a lot more! 

 

What property price increases have you seen in your area?

According to the Liverpool Echo, Liverpool has the fastest rising house prices of any UK city. This year is set to be the busiest for the UK housing market since 2007, with Liverpool topping the house price charts at 10.6% and some areas such as Toxteth maxing out at over 20% in just 12 months.

 

Are unfurnished properties renting better than furnished? 

We find that most properties rent better if they are unfurnished, that is unless they are a house share or student accommodation, then of course furnished is best.

 

What are the key features tenants are asking for right now?

Of course they still want the usual, a good location that feels safe, a nicely presented property that’s clean and has good access to facilities and transport, but this year we have seen a rise in tenants asking for gardens, and to be allowed pets (probably due to the experience of lockdown), and with HMO’s they really do all want en-suite facilities (due to becoming more germ aware). 

 

How many applications from tenants are you getting per property?

During most of 2021, we were seeing around 10 applications from tenants per property, however, this year it has more than doubled, we seem to currently (January and February) be getting up to 25 pre-applications for each property, it's gone crazy!

 

If you were looking to buy a property right now Elisha, what would you buy?

If I was to buy a property now, I would definitely be looking to secure a 3-bedroom terraced house for around £130k, generating me a monthly rent of around £750pcm which results in a 7% gross yield, because I know I could rent it over and over again with zero problems and get good quality tenants.

 

What sort of landlords are buying at the moment?

It seems all types of landlords are buying at the moment, from 1st-time landlords, those with 1 or 2 properties looking to expand their portfolio and large landlords alike, it feels like everyone is buying right now, it’s a very busy market, driven in the main by the huge increase in demand and the shortage of stock out there.

 

What’s the big challenge for the Liverpool market at the moment?

It has to be the introduction of another Selective Licensing scheme across Liverpool from April 2022. This is going to be an additional cost and more paperwork for those landlords in the areas affected, but we have been through this before with Sefton, so we are ready to support our landlords through it.

If you have any queries regarding any of the subjects covered in this article or want to learn how the introduction of the new Selective Licensing laws could effect you as a landlord in the Liverpool area, we're running and inviting you to a free-to-attend webinar on the 23rd March 2022 at 18:30. On the webinar, we will cover all the nitty-gritty details you should 100% be aware of.

Register for the webinar on the next page.

Electrical Certificates – why every landlord should have them

The risks

Imagine if you picked up the phone in the middle of the night to be told that there was a fire at your rented property. As horrific as that news would be, one of the first things that the fire department, the police, and the insurance company would check is whether or not the electrics and electrical appliances within the premises were safe, or whether they could have been the cause of the fire.

And if that were the case, who do you think liability would automatically be with?

If you fail to produce a valid electrical certificate, it could very well be you, the landlord. That would mean that not only do you risk prosecution, but it’s highly unlikely that your insurance would payout.

But, if you have a valid, up to date certificate from a qualified electrician, then you have proof that you have done everything you can to ensure that the electrics in that property are safe. In that case, liability would no longer lie with you as the landlord, but with the electrician, as the question would be whether he had completed the work properly, or with the tenant, who has a responsibility to take care of the property while he or she lives there.

Is it law to have an electrical certificate for my property?

It will be, as right now Government are in processing a law which will mean that all rented properties will have to have electrical checks every 5 years. However, until that time, most agencies are recommending that their landlords get ahead of the game and make sure that all new tenancies start with a valid and up to date electrical certificate, before the tenant moves in.

That’s because, under the Consumer Protection Act Section 37 and Section 19, you have a responsibility to guarantee that your property is safe and fit for tenants to live in. And having an electrical certificate is part of that responsibility.

What will the new law mean for landlords?

Landlords will be required to have electrics checked in their properties every 5 years. This is mandatory, and must be carried out by a qualified electrician. This will be phased in over 24 months; in the first year, all new private tenancies will be affected, and in the second year, all existing private tenancies will also have to adhere.

If a property has recently had an electrical installation condition report (EICR) and has a valid certificate, then the property will not be required to have an inspection until 5 years has lapsed since the date of issue.

What will the required checks include?

The new legislation will require 5 mandatory recommended electrical safety features, which are:

What’s the difference between an EICR and a PAT test?

When we talk about getting an electrical certificate for your property, we’re really talking about the EICR – this is a test carried out by a qualified electrician, and tests the infrastructure of the properties electrics. As detailed above, this includes the wiring, units, plug sockets and switches etc.

A PAT test is really there for the appliances within that property. That would be anything that you include as portable appliances in the property, which might be things like a fridge or freezer, electric oven, dishwasher etc. It’s not mandatory for you to have a PAT test, but some landlords like to get one if they do include these appliances, as again, it provides an extra layer of cover if anything should happen.

In conclusion

While it’s not law to provide an electrical certificate at the time of writing, it’s highly recommended that you obtain one. It’s a small price to pay for peace of mind that your property is safe, and that you won’t be held accountable if something should go wrong.

The Government will be changing the law on this soon, so get ahead and make sure that you’re properties are protected, if not on existing properties, but on all of your new tenancies going forward.

If you are looking to keep all your properties safe by staying compliant with current legislation, click HERE to download our FREE compliance checklist.

What Should You Look For When Buying A HMO?

Given the right area, investing in a HMO can be a great way to increase the yield of a property, and a way to boost your portfolio. But whether you are new to the property game, or are a seasoned landlord looking for a different route, what should you be thinking about when you are looking for a HMO?

About HMO’s

There are many reasons why landlords are attracted to the HMO market – in the right location, they can give a much larger return than a general family property, because they are leased as individual rooms or spaces rather than as a whole. This means that you are in effect renting out several dwellings in a property, rather than just one.

Generally, there will be two routes to get you there. You can either look at purchasing a property which is already set up as a HMO, in which case the layout is much less, or, you can look for a property where you can convert a property from a single dwelling/single use into a HMO. If you’ve got the money to put down in doing this, you are able to create the space however it works for you, geared towards a specific market, and can potentially make some more money selling it on as a HMO.

Traditionally thought of as student accommodation, HMO’s are also becoming more popular in affluent city centre locations, where rents are higher, and young professionals are looking to keep costs down by house-sharing.

So areas surrounding universities are still very popular, but also consider areas where young people are starting their careers, and perhaps might be searching out house shares while they are still single and forging their own paths. This also has the additional benefit of allowing landlords to seek out more expensive properties, which are more likely to have a higher yield as a HMO than as a family home.

What type of property makes the best HMO?

If you have no experience in the HMO market, you might think that you have to seek out a specific type of property for you HMO – something large, with a minimum number of rooms of bathrooms – but actually, that’s not necessarily the case. In fact, almost any type of property can be converted into a HMO.

Under law, a HMO is defined as being a home rented by three or more tenants who are not part of the same household/family. So in theory, even a small bungalow, for example, could be considered as a HMO, if shared by three people, providing the correct criteria are met.

The main things you’ll need to think about are choosing the correct location, and whether you have the vision and skill to make your property work as a HMO. Location should always be the key factor.

Do I need a HMO licence?

In most cases, yes, you will need to apply for a HMO licence. Currently, the criteria are:

Any of these will require you to hold a HMO licence, although you should always check with your local authority, as some areas have slightly different rules.

Are HMO’s harder to maintain?

HMO’s are usually rented by students or young professionals who typically are looking for short-term accommodation, whether that’s based on the academic year, or the term of a work contract etc. As such, you will normally find that your HMO turnover, in terms of tenants, is higher than it would be for a normal dwelling.

While that might mean that you’re more likely to fill the property quicker, it also means that due to the temporary status of the accommodation, your tenants are less inclined to put their efforts into general maintenance of the property, and this means that you will have to put more time, effort, and money into cleaning up after they vacate.

As well as this, the shared areas, such as kitchens, bathrooms etc. will have a much higher general usage than in a normal house, so there will be much more wear and tear on things like carpets and flooring, furnishings, and appliances.

It’s worth considering, if you’re thinking about taking on a HMO, that they do require more upkeep on a regular basis, and so those expenses need to be taken into consideration.

Converting into a HMO – is it worth it?

If you are in an area where demand for shared accommodation is high, and you’re thinking about converting a property into a HMO, there are some factors to consider.

You will need to ensure that the property has adequate space for your tenants, and is safe, clean and habitable. You will be subject to spot-checks by the local authority, and any failures in standard could lead to your licence being revoked, as well as a hefty fine.

Also consider whether you will want to make use of spaces such as living rooms as additional bedrooms – many landlords do this to maximise the rooms they can rent, but it’s also important to consider the communal areas – is there adequate living space to allow for an area for your tenants to gather and sit? If you have a kitchen diner, you might want to use the dining space for a lounge or seating area for them to relax.

If there is a garage attached to the property, there is possibly scope to add another room/bedroom. But you will have to seek planning permission, so get advice from your local council before doing this.

A quick guide to converting HMOs

With property prices ever increasing and successive governments taxing income from property more and more each year, landlords and property investors are often  turning to houses of multiple occupation sometimes known as HMOs for higher rates of return.

So why do HMO give landlords and property investors a higher rate of return?  Well essentially this is down to the fact that HMO properties are rented out by the room rather than as a whole property. 

So how do you achieve these higher rents and higher rates of return? 

What you do is you create a situation for individual single tenants where the rent is affordable. Note the word affordable here. We're not saying that it wouldn't be cheaper to rent a whole property if you were say in a couple or in a group but if you are renting on your own and have no one to share the costs with then renting a room in a shared house will ultimately be cheaper.

So what creates an attractive proposition for such a single tenant? 

Well I would say first of all it is having a room in a house which is literally ready to go. Nothing more required than bringing your own small possessions and clothes and getting settled in.  

Why is this important? Because it keeps costs down and it allows people to move quickly. 

What this means to you as someone thinking of converting a property into an HMO is that you need to ensure that the rooms large enough to be comfortable and that the property is sufficiently furnished and well equipped - to all intensive purposes so it’s ready for someone can move into it in the same way they would a hotel room.

You also need to ensure the property that you are thinking of converting into an HMO is in a location which your tenants will want to live in. Please see my article on choosing the location  for are HMO for more details on this.

But what about the legal constraints for creating or converting an HMO?

You may have heard that there is a lot of legislation surrounding converting and running an HMO and you'd be right. Due to the nature of HMOs and the number of people that live in them, there are naturally concerns about ensuring that the occupants are safe and secure. Iit is no longer a situation where there is a single family unit where people are looking out for each other but instead 5 or 6 individuals and it can't be it can't be assumed that they are all cooperating in keeping the property safe.

So what can you do as a landlord to ensure that you stay on the right side of the law when converting a regular residential property to an HMO? 

Firstly I would say invest in your own education.  There are plenty of courses run by industry experts who will teach you everything you need to know relating both to the legislation and the practicalities of converting a property to be a compliant and functional HMO.

Secondly, speak to a local agent you have a working knowledge of he knows not just from a theoretical point of view from the practical experience of actually letting and managing them.  take it from me there a lot of different skills and knowledge required to safely and successfully let and manage an HMO.

Thirdly, don't underestimate the amount of time which managing as an HMO will take.  you may think at the outset it is just a large terraced house but if it is 6 bedroom HMO then in reality what you have are six houses with six separate tenancies 6 separate tenants 6 lots of questions problems rent to chase and other usual repair and maintenance issues.

As a landlord myself and having managed my own and families properties myself I can attest to the fact that whilst it is perfectly possible to manage one rental property what even 2 or 3 whilst holding down a full time job it is very difficult to manage any more than that and retain a healthy work life balance.  This is why I say to any landlords or property investors thinking of buying or creating / converting a property to an HMO, factor in the costs of professional management.

Is there any specific legislation which you should be aware of?

The short answer is yes lots but in a nutshell the main things you need to bear in mind or and this is in no particular order

For more help, information and advice about converting the residential property to an HMO what any other aspects of owning, letting or managing an HMO in Birmingham please contact us on 0121 405 0389.

Which are the best areas for Houses in Multiple Occupation (HMOs) in Birmingham?

In my experience there are three main areas in Birmingham which are particularly popular with HMO investors.

The first one is right next to our office in the Edgbaston area. The reason this is such a popular area for HMO is probably down to a couple of things: the first one being the style of properties.   these are predominantly Victorian with least two reception rooms and a usable attic.

The Edgbaston area lends itself nicely to HMO is because of its proximity to Birmingham City Centre. Edgbaston spans a wide area but on its edges backs onto the Hagley Road on one side and the Bristol Road on the other; both of which are main arterial roads into Birmingham City Centre. 

Another area which is very popular for HMOs in Birmingham  is to be found just north of Birmingham city centre. Leave Birmingham heading North and the next main area you find just past Spaghetti Junction in Erdington. In terms of property styles, Erdington is very similar area to Edgbaston. Large Victorian houses, mostly with accommodation across three levels lends itself very easily to converting to HMOs with five or more bedrooms.

Location wise Erdington is also very conveniently situated for Birmingham City Centre. Historically north Birmingham has always been slightly less expensive and South Birmingham and indeed in terms of rents and prices for rooms this is definitely the case.  however in terms of property values I would say the prices are continuing to rise and on a par with Edgbaston.  what this means if you are thinking of buying an HMO  in Erdington is you need to carefully researched the ceiling price for room rates  and make sure that you're not trying to exceed this ceiling price. 

In case you are thinking of investing in property to be turned into an HMO in Bournville, which is the last of the three popular areas I mentioned favoured by investors purchasing properties to be converted into HMOs in Birmingham you need to be aware of just one thing.  Bournville and Selly Oak are affected by something called Article 4.  If you're not sure what this is I suggest you Google it but in a nutshell it is an additional planning control which restricts  existing properties being converted into HMOs.

So whilst Bournville is a great area in terms of attracting professional sharers and is well situated with good rail links into the centre of Birmingham, you need to bear Article 4 in mind.