Marion talks money

Marion Money, NLA Representative for Kent, talks about how to manage and maintain a tenancy when tenants find themselves in financial difficulty.

As landlords, we do not have any responsibility for our tenants’ finances.

However, if our tenants gets into financial difficulty they may struggle to pay the rent – which is very much our concern!

In my years as a landlord I’ve learned what to look out for and am usually able to pick up the early signs that my tenants may be getting into debt.

For example:

  • Tenants avoiding your calls and/or letters;
  • Piles of unopened post (many that look suspiciously like bills) when you visit the property;
  • Tenants never having credit on their phone                                                      – not even for texts.

Recently, one of my tenants became a victim of the recession.

The company she worked for went into administration and she lost her job. She missed a rental payment but as she had always worked did not know how to go about getting assistance from the local authority.

When I managed to make contact and talk to the tenant, I helped her to claim the benefits to which she was entitled and now she is back on track. She even has a schedule for repaying the arrears.

If problems do arise, encourage your tenants to talk to the local authority – in most cases this would be the Housing Options team. Local authorities have a vested interest in helping a tenant stay in their home and they will know the correct local agencies to help with debt management. They also have a lot of influence with the utility companies and can often get debts cancelled.

You might also want to consider suggesting your tenant opens a credit union account. This will give them access to a low-cost banking system where they can:

  • Start regular but affordable savings plans (which could be used as a deposit when any local authority bond expires);
  • Set up direct debits for utility bills – this is the cheapest way to purchase domestic energy;
  • Obtain access to responsible borrowing;
  • Take out contents insurance.

The benefit to you is that some credit unions are also able to ‘ring-fence’ LHA – if you’ve not been able to arrange direct payment that is. This means that they can earmark any funds coming in from the local authority as Housing Benefit or LHA and ensure that it only goes to the landlord for rent.

The tenant cannot use it for anything else, and crucially it cannot be consumed by bank overdrafts or swallowed up by other debts or Direct Debits.

The only catch is that the landlord generally has to pay for the service – but in my experience a few pounds for guaranteed rent is much better than tenants falling into rent arrears.

As far as I am concerned, helping your tenants when they get into financial difficulty is both morally and ethically right as well as making good business sense. A previously good tenant receiving financial help is far better than no tenant at all or a tenant you do not know. Any arrears your tenant has built up will remain if you seek possession and costs and will continue to rise throughout the court process; a new tenant could rack up more arrears and you very rarely make back rent lost during a void.

7 thoughts on “Marion talks money

  1. Marion’s no nonsense approach is very insightful. No landlord wants a void period. She is spot on when she says:

    “A previously good tenant receiving financial help is far better than no tenant at all or a tenant you do not know.”

    Let’s hope this is read by local authorities and by landlords tempted to rush for their Section 21 paperwork.

  2. Exactly Steve, tenants who feel secure in their properties treat them as their home, with respect. They want to keep their homes so, although they may struggle , they manage to pay their rent. They settle down into a familiar routine and ‘hey presto’ you have long term tenants and avoid the costs and workload that go with tenant churn.

  3. Great post Marion and really good advice.
    So many landlords say “I don’t let to LHA tenants” but in reality anyone can become an LHA claimant through change of circumstances like relationship breakdowns as well as job loss. Every landlord needs to read this Blog and to follow you good advice if and when they need it.

    Many landlords in the West Midlands are finding Credit Unions are a good solution and most do not mind paying a small monthly fee to ensure that they get the balance of the rent.

    I could not agree more about the cost of churn, many landlords do not take this into account, nor the void that they may be creating by evicting a previously good tenant. In my book better to work with a tenant that you know than take a risk with a tenant that you don’t know.

  4. You are spot on! The other thing is to say to all tenants that it’s much better to ask for help or time to pay early. Better to be flexible over payment dates and times than see banks charging huge fees for every cheque etc. Our experience is that being a reasonable landlord (who understands that no one chooses to lose their job) makes for very reasonable (even loyal and helpful) tenants.
    Keep up the sound advice…

  5. Thanks Rob, I think we are all united about bank charges but thats another subject!
    Its good to see tenants been given advice to have the confidence to seek help ..
    From a landlords view point it is very difficult when a tenant does not respond . Its understandable that someone in trouble wants to bury their head in the sand and hope the problem will go away but its the old addage of a stitch in time and a landlord has to so very careful that they are not harrassing the tenant. A fine line that noone should cross.
    Good landlord tenant relations makes everyones life so more relaxed.
    I have many loyal and helpful tenants and some where i am pretty sure the neighbours would not know they are renting as opposed to owner occupiers.
    A united message to both landlords and tenants to seek help as early as possible is a good way of maintaining good landlord tenant relationships.

  6. I couldn’t agree more!

    I have been renting a portfolio of properties for nearly ten years now and (I’m touching wood here!) we have, fortunately, had very few problems with rent arrears. However, on the few occassions that something has gone wrong, with hindsight, the warning signals were all there.

    Now, its about being proactive, engaging with the issue and encouraging the tenant to deal with things. In my experience, the tenant rarely sets out to ‘steal’ your rent but because some people stick their head in the sand and hope it the problem will go away, one thing compounds another until they are hopelessly over their heads. I avoid eviction proceedings at all costs – it is a lengthy, distressing process (for everyone involved) with little chance of getting your money back and an empty property which may take a couple of months to find another tenant for.

    I think it was Warren Buffett who said, “No problem ever got better by leaving it alone.” and it is so true. As soon as one payment is missed, (or even late), I arrange a meeting with the tenant and often, over a cup of coffee and with honesty and frankness on both sides, we discuss any problems.
    Just recently, I had exactly this issue with a young couple who had got themselves into financial difficulty and had missed their rent. We met up and eventually they admitted they could not afford to stay in the property. We discussed an action plan, agreed what they could afford and I waived the need for the required notice period in return for using their deposit in lieu of rent. I know some people will not advise this, but at the end of the day, you are managing a business and personal judgement and experience have their role to play. It just so happened I had someone waiting for this type of flat. The flat was in excellent condition and the old tenants moved out on the Friday and the new tenants moved in on the Monday. The young couple were almost in tears thanking me for helping them to get out of what they thought was an impossible situation.

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