It’s not just mortgage payers that are having trouble making ends meet. Rental payments can often be just as costly as a monthly mortgage repayment, and in an increasingly difficult fiscal landscape more tenants are struggling to make those monthly payments on time. Consequently, many are so desperate that they turn to payday loans, which in turn can compound the problem and send them spinning downwards into a spiral of debt.
A recent survey by homelessness charity Shelter suggests that almost one million people in the UK have resorted to a payday loan to meet their rent obligations. The survey also found that seven million people use some form of credit (be that a credit card, loan or loan from a friend or family member) to pay the rent.
While this may seem to be a problem that’s confined to tenants, the truth is that it can have a knock-on effect for landlords too. Financial problems for a tenant can quickly become the landlord’s problem too, especially if it results in late or non-payment of rent. So how can landlords protect their assets and their finances when belts are already tightened? Here are a few tips:
#1 – Credit checks aren’t just for banks
A credit check should be part of your initial letting process to establish the financial security of your prospective tenant. Of course, even a spotless financial credit check cannot guarantee that there won’t be problems later on, but initially it gives you a chance to look out for ‘red flags’ such as CCJs or a history of falling into arrears on payments.
#2 – Ask for references
Most landlords already do this, but do you follow those references up? Make sure you check with previous landlords or letting agents to ensure that there is no history of arrears.
#3 – Stay on top of payments
A late payment after a period of relatively hassle-free rental payments could indicate that the tenant is struggling financially. Always check on the due date that your tenant has paid on time, and if not then check with them immediately to find out if there’s a deeper problem.
#4 – Approachability – it’s a two-way street
Following on from #3, make sure that your relationship with your tenant is one that allows the tenant to feel confident in approaching you if there is a problem. Make it clear that communication is better than ‘radio silence’ and will enable you to find a solution to any financial problems that works for both of you.
#5 – Negotiation
Be prepared to negotiate. After all, 50% of something is better than 100% of nothing! Although there has to be a ‘cut off’ point (and the tenant has to be fully aware of that), in the immediate term it may be far more beneficial for both parties if a negotiated settlement is reached, perhaps by allowing either a little extra time to pay or by divvying up any existing arrears into easier to manage monthly payments.
#6 – Landlord insurance – a must have
Landlord insurance isn’t a new concept, but surprisingly few landlords actually have specific insurance to cover non-payment of rent. Known as tenant default insurance or rent guarantee cover, it will protect you against non-payment of rent and ensure that you’re not left substantially out of pocket.
By Rory James MacLaren-Jackson
Rory James MacLaren-Jackson is a director and founder of the Property Agency Training and Letting4Success training channels. He started his own agency from scratch in the early 2000s before refining and then teaching his successful, innovative and no-nonsense approach to estate and letting agency practice.