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Partner and Head of Family Law, Rugby
Recently-published research from the National Landlords Association shows an alarming increase in rent arrears for tenants in the private sector, with record levels of evictions carried out by landlords in England and Wales last year, demonstrating the current, turbulent state of the privately-rented market.
The NLA states that between the second and third quarters last year, rent arrears rose by almost 14%, with 37% of landlords having tenants that were in arrears during 2015.
A total of 42,728 evictions were also recorded by the NLA.
Rent values have increased dramatically in the past few years, which in turn will naturally place a strain on many tenants keeping up-to-date with their rent payments. It is important that landlords try and protect themselves as much as possible at the outset of tenancies; I have set out three key areas to think about below.
1. Undertake proper background checks
As landlord, you must be satisfied that the tenant is in a sufficiently comfortable financial position to keep up with their rent payments; organise a professional check on each tenant and make sure that you inspect the results before committing to a tenancy agreement.
Given that landlords are now under a legal obligation to check that their tenants have the right to rent property in the UK (and worryingly, the NLA has stated that 90% of landlords are still unaware of this obligation), a comprehensive check should give security and peace of mind, both that the tenant is in a stable financial position and that legal obligations have been complied with.
2. Take a deposit, but protect it properly
From the date that a deposit is received from a tenant or guarantor in relation to a tenancy, the landlord will have 30 calendar days, firstly to protect it in an authorised deposit scheme and then to serve certain information, required by law, on the tenant.
If the landlord fails to protect the deposit, either within the 30-day period or at all, then this effectively means a landlord cannot serve a valid notice requiring possession of the property at the end of the tenancy until the deposit has been returned to the tenant. If the prescribed information has not been served, then a valid s.21 notice cannot be served.
Failing to comply with deposit legislation can have serious implications, particularly if possession proceedings have been initiated on the basis of a notice that has not been validly served. A landlord unfortunate enough to find himself in this situation faces his possession claim being dismissed.
3. Prepare for the worst
In order to evict a tenant from residential property, it will be necessary to obtain a Court order. There is no shortcut around this process (save for the tenant leaving of his or her own accord).
It is important that you appreciate, from the outset of the tenancy that evicting your tenant can take a number of months, taking into account the notice period given to the tenant, Court proceedings and a bailiff being needed to carry out the eviction.
This can have a very serious effect, for example, if you rely on receiving rent from your tenant in order to meet mortgage repayments on the property. If the tenant stopped paying rent, ensure you can afford to meet the shortfall from your own resources, whilst the eviction process is being carried out.