Bankrupt Tenant – it seems my tenant will be declared bankrupt very soon. He is self employed and his business is in trouble. He says he will still be able to pay my rent, even though he is 3 months’ in arrears and has 6 months left on a 12 month tenancy. I’ve been told that I can’t insist on this as he will be protected and I won’t be able to evict either. Is this right?
During these difficult economic times tenants in arrears and bankruptcy are occupational hazards for landlords and even the best of tenants can find themselves in this position.
Housing benefit is one option for tenants in difficulty, so landlords should always encourage tenants to seek assistance in this way and where the tenant is willing to cooperate, should assist in any way they can.
As I understand it, if your tenant is willing to pay rent voluntarily, and as rent is considered an essential, you are a primary creditor, and he will be allowed to pay, providing he has the means. Once bankrupt the Official Receiver will take charge of his income and any salvageable assets. So after normal living expenses (which will include your rent) the rest will be seized.
However, being three months in arrears already, his promise to pay rent may be rather hollow.
Under the circumstances eviction may be your best remedy and the section 21 possession procedure is always the best option, as then a possession order is mandatory and bankruptcy will not protect him in this. However, (1) you must serve a 2-month s21 notice and (2) you will not be able to start possession proceedings until the remaining six months of the tenancy are up.
Your other option is going to court for rent arrears (breach of contract) using the Section 8 procedure.
There has been a question mark over whether a landlord could rely on rent arrears in the case of bankruptcy or a debt relief order as a ground for possession. However, a recent court of appeal decision Sharples v. Places for People Homes Limited (May 2011) makes it clear that providing the usual debt criteria could be met (minimum of 2 months arrears) then the insolvency would not prevent the judge making a possession order.
However, a money order (for the rent arrears) would not be allowed in these circumstances.
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