Buy to let demon tenants
It’s every landlord’s nightmare: tenants who either damage your property, or
don’t pay the rent, or both, Emma Lunn looks at the best ways of avoiding
tenants from hell and what to do if you do get problems.
Unless they turn up with 666 tattooed on their foreheads and a stream of angry
ex-landlords chasing them down the street, dodgy tenants can be difficult to
spot.
So-called “tenants from hell” are every
buy-to-let landlord’s worst
nightmare and problems can range from damaging property and making too much
noise to doing runners or not paying rent. And if the worst comes to the worst,
evicting a tenant is a time-consuming, stressful and sometimes expensive
business.
But landlords and tenants have always had a tenuous relationship. Back in the
1950s notorious slum landlord Peter Rachman got landlords a bad name by
exploiting hapless tenants and using violence to get rid of anyone who crossed
him. By the 1970s, the balance of power had shifted and tenants almost had
security for life. Nowadays things are more even with tenants not being allowed
to take possession of a property and landlords needing to go through proper
legal channels to evict them.
Do your homework
The key is making sure you do not get saddled with a problem tenant to start
with. Information from the National Landlords Association (NLA) shows that up to
half of all landlords have, at some point, had a property abandoned by a tenant.
NLA chairman David Salusbury says there are a number of steps landlords can take
to minimise the risk of letting your property to a potentially troublesome
tenant and suggests firstly getting a written reference from the prospective
tenant’s employer.
“This confirms that the prospective tenant is indeed a full time employee with
the firm and gives the landlord an additional contact should the tenant leave
before the tenancy is up,” he says. “Tenants are much less likely to abandon a
property if a landlord has a record of their place of work and next of kin.”
Salusbury also suggest getting a reference from the tenant’s previous landlord
if relevant and taking a month’s rent as deposit at the start of the tenancy to
cover any lost rent or damages.
If you do not want to chase up references yourself you could get an agency to do
it for you. Letsure, for example, provides a tenant assessment service (TAS) to
verify the information provided by prospective tenants. Over 100,000 checks were
made using TAS last year.
Letsure managing director Brian Turney says: “Within minutes of landlords
contacting us, we can provide a full credit assessment and if required, then
take up further references to confirm employment and if applicable a reference
from a previous landlord.”
The Letsure service uses verification tools to help confirm that an applicant is
who they say they are to enhance the credit search and enable validation of a
potential tenant’s identity. Verification of a potential tenant against ID fraud
is carried out using known credit bureau data for assessing the potential risk,
complemented by independent data sources to provide a basis for recommendations.
Checks to confirm the tenant’s date of birth with one of the UK’s credit bureaux
are undertaken, as are checks to confirm they are actually living at the address
stated on the application form.
Letsure offers two levels of service; a standard service starting at £12.00 plus
VAT and a comprehensive service starting at £25.00. The comprehensive service
includes checking any reference supplied from a current or previous landlord.
Experian run a similar service called Tenant Verifier (www.tenantverifier.com)
which costs £10.48 for its standard service and £21.51 for its full report. It
can also run reports on guarantors that might be backing a tenant.
Deposits and agreements
It is a good idea and standard practise to get a month’s rent from your tenant
as a deposit. This can cover any unpaid rent or damage to the property at the
end of the tenancy.
From October, all landlords who take deposits and whose tenancies fall within
the provisions of the Housing Acts (which includes all tenancies with a rental
value of less than £25,000 a year) will have to join an authorised tenancy
deposit scheme.
The idea is that these schemes will protect tenants' deposits from rogue
landlords who do not pay up at the end of the tenancy. Landlords can either join
a custodial scheme or an insurance based version of the scheme.
Landlords should also ensure they have a tenancy agreement in place. Agreements
can be downloaded from landlord advice website www.landlordlaw.co.uk if you are
a member of the site. Before tenants move in you should also carry out an
inventory which should list the condition of all the contents of the property
and who – landlord or tenant - is responsible for what. Then ensure it is signed
and dated by both yourself and the tenant.
If you hire an estate agent to manage your tenancy then they do a lot of the
hard work regarding tenant verification, tenancy agreements and inventories for
you. “They will have the appropriate experience to ensure you have good tenants
who are properly vetted and will pay the rent on time,” says Peter Bolton King,
National Association of Estate Agents chief executive, “The agent will help you
with the contract and inventory you will need to have in place. Remember to do
your best to maintain a good relationship with your tenant and be responsive to
any problems with the property. By looking after your tenant, he or she is more
likely to look after your investment.”
Take cover
Some companies offer specialist insurance products that cover landlords against
tenants failing to pay rent, refusing to leave after notice has been served or
damaging property. Be aware though that some policies will only pay out if the
tenants have been properly verified in the first place.
Letsure has been providing insurance cover for landlords for over 16 years and
currently insures in excess of £2 billion of let property. Premiums are based on
the monthly rent of the property and for a typical rental of £800 per calendar
month, the premium would be about £15.20. Rentsure silver annual policy includes
the following; rent and legal expenses cover to obtain possession of property,
payment of monthly rent for a maximum of 12 months following non payment by the
tenant, legal fees paid to evict squatters and accommodation costs paid up to
£50 per day or £1,500 per claim until vacant possession is obtained.
Meanwhile Rentguard Insurance
charges costs £52.50 for six months cover of legal expenses & rent guarantee and
£103.95 for 12 months. The policy covers all tenants within a property. Legal
expenses can be bought as a standalone product for £39.50 for 12 months and will
cover the landlord’s costs of any disputes between themselves and their tenant.
What if it all goes wrong?
Once a difficult tenant is resident in one of your properties it can be a long
and drawn out process to get them to leave.
Under UK law it is illegal to evict a tenant of residential property by force,
or to harass a tenant to make him leave by, for example, cutting off the gas or
water supply. So landlords need to do things through the proper channels and
this means a court order from the county court.
Orders are normally obtained and eviction notices served under either section 8
or section 21 of the 1988 Housing Act. Section 8 related to rent arrears and
section 21 if the proper form of notice has been served according to the terms
of the tenancy but the tenant will not leave. So, if the tenancy agreement
states you have to give the tenant two months notice to move out and you have
done so and they have not left, you can get a court order under section 21 to
gain possession.
You can also evict a tenant for breaches of his or her tenancy agreement such as
antisocial behaviour or damaging the property.
In all cases, it is essential that landlords keep copies of the completed
tenancy agreement, any notices served on the tenant and up-to-date records of
all correspondence.
If you want to go through the courts to evict a tenant, getting the paperwork
right is essential. The Residential Landlords Association reckons half of all
court applications for possession notices submitted by private sector
residential landlords are doomed to fail due to mistakes in the paperwork.
A new piece of software on the RLA's website makes it easier for landlords to
complete printable forms. And a personal checking service, which then searches
for errors before they are submitted to court, has just become one of the
association's top member benefits.
"An applicant often doesn't discover there's a problem until the court hearing
-up to two months after lodging the possession summons," says RLA trainer and
helpline manager Dave Absalom. "The process then has to be started all over
again. In the meantime the tenant is legally entitled to stay in the property
and, even then, a landlord may have to apply for bailiffs to evict. The loss of
rent, and possible damage to the property, adds up to a considerable sum.”
If you are not a member of the RLA or similar and are not confident completing
the paperwork and initiating court proceedings yourself, you can get an
independent company to do it for you.
Landlord Action is an organisation set up to help landlords recover rent and
property from bad tenants. It deals with hundreds of cases at a time and has
evicted thousands of problem tenants over the years.
It operates on a fixed fee basis and follows three steps under the Housing Act
1988. Co-founder and director Paul Shamplina explains: “First, we serve a notice
on the tenant for you. For rent arrears this will be a section 8 notice which
tells the tenant he has 14 days to pay his rent or claim under grounds for
nuisance, noise or breach of tenancy. If he or she is not in arrears but you
want to evict them we can serve a section 21 notice to tell them you are ending
the agreement.”
This first step costs £115 including VAT and in about 60 per cent of cases is
all it takes to get the tenant to leave. If the tenant still refuses to pay up
or vacate the property, Landlord Action moves on to the next step which is going
to court to get a possession order.
“This costs £564 including all court fees, solicitors fees, advocates’ fees and
VAT,” says Shamplina, “It takes about 8 weeks to get a court date to get a
possession order.”
Landlord Action will inform you who the name of your advocate is and you will
meet them at the court. You will need to have with you your file of papers with
a stamped tenancy agreement and an up to date schedule of exactly how much rent
is owed.
If the tenant does not show up at court the judge will normally award you a
possession order in their absence. This gives the tenant 14 days to leave. If
they do turn up and put forward a defence case then the case will be adjourned
and you will have to pay for a solicitor to attend the next hearing.
“If you have got a possession order and they still don’t leave, the third step
is sending the bailiffs round which costs £198 and can take up to six weeks,”
says Shamplina, “this means the process can take up to about four months in
total.”
After you eventually get your problem tenant to leave, recovering unpaid rent
can be a problem and Shamplina estimates that 80 per cent of landlords do not
recover the money they are owed. If the tenant is claiming housing benefit, it
is very unlikely you will receive any money but if you think your tenants have
the money to pay Landlord Action can pass your details onto their debt
collectors who may be able to track the tenant and collect the debt, but this
costs more.
Useful websites
National Landlords Association www.landlords.org.uk
Letsure www.letsure.co.uk
Experian Tenant Verifier www.tenantverifier.com
Landlord Law www.landlordlaw.co.uk
National Association of Estate Agents www.naea.org.uk
Rentguard www.rentguard.org
Residential Landlords Association www.rla.org.uk
Landlord Action www.landlordaction.co.uk
Published July 2006
This article has appeared in Mortgage Magazine which is available in all good newsagents. Copyright MSM International Ltd
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