In an ideal world, tenants would pay their monthly rent on time, every time. But in the real world – where you and I live – tenants often have different ideas.
So, what should landlords do when payments stop?
For many landlords, this is a path well-trodden. They have found themselves in this situation on more occasions than they care to remember. Over the years, they have heard all the excuses and have grown a thick skin to match. Now, they recognise the signs and they know exactly what to do. Like clockwork, these same landlords waste no time and spring into (Section 8 eviction) action.
And then there are the ‘other’ landlords. The ones who show leniency in the hope that this is nothing more than a blip on the landscape. Things will resolve themselves soon, right? Sometimes, this can pay off, but often, behind the rosy outlook, comes a long battle for payment and the inevitable eviction wheel finally grinds into motion.
And then, finally! Possession is granted and the keys are returned to the landlord, hurrah! But what about all those months of unpaid rent? Can landlords ever expect to claw back their legal fees or other associated eviction costs?
In the majority of cases, the tenant simply will not have the means to re-pay the outstanding debt. It is a bitter pill to swallow, but landlords must accept that these (often chunky) losses will never be recouped.
So, what – if anything can be done to attempt to secure that debt?
This is where we come in. Our first step is to enforce the order that you received following the possession claim. As a matter of practice, we make sure that all unpaid rent, plus interest and legal costs are part of that judgment.
We also make sure to ask that the County Court to “transfer-up” to the High Court in an attempt to expedite matters. It is important to note that at the time of writing, transferring up has become a slow process. Pre-Covid days, it was a faster procedure to get to enforcement, but inevitably, there are delays, similar to that experienced in the County Court bailiffs.
- Bailiff Action
County Court Bailiffs with a Warrant Of Control can seize assets belonging to the debtor and sell them at auction. This will go some way to recompense landlords for those months of missed rent.
This process does have its limitations. The sale of goods is not certain, and the associated costs of storing and selling the goods are deducted from the overall sale proceeds.
- Attachment of Earnings Order
This order instructs your tenant’s employer to deduct a portion of their earnings and send it to the court. This is then paid over to the landlord. This too has its limitations; it cannot be used if the tenant is unemployed or self-employed. Normally the court will only attach a small monthly sum, so the debt can take several months, if not years to re-pay. Further complications arise if the tenant leaves the employment which the order is attached to. In this instance, then the whole process has to start again.
In some instances, the court can order that a Bank or Building society pays the landlord whatever money they have in their accounts.
- Charging Order
Alternatively, Charging Orders can be awarded where the tenant has assets. In many ways, this acts like a second mortgage against the property but in reality, it is very rare that the tenant owns another property.
- Bankruptcy Order
Another, more nuclear option is to apply to the court for a bankruptcy order. But it’s worth remembering that it is an expensive recourse and you are unlikely to get any benefit from it. Consider if the application itself would persuade the individual to settle the outstanding debt. Bankruptcy Orders can have a long-standing negative effect on credit ratings and will prove to be particularly challenging for company directors, entrepreneurs and those applying for a mortgage.
- County Court Judgement – also known as a CCJ
Where a CCJ is made against a tenant, it acts as a warning notice to credit agencies who may otherwise consider lending money to the debtor. A CCJ sets out how a debt should be repaid. Failure to adhere to these terms can result in further enforcement action (see above points 1-3)
Regardless of whether you are likely to obtain financial recourse, you may still wish to obtain a judgment against the debtor. Think of it as an insurance policy, as you never know when the tenant might land a well-paid job, win the lottery, or come into inheritance.
Once a CCJ is issued it lasts up to 6 years, but with the leave of the court (i.e., on application) this can be extended.
Securing a CCJ and diarising to review every 6 to 12 months may be a sensible option to take, even where the outlook is initially bleak. Circumstances can change and we have qualified professionals at hand to assist in locating elusive former tenants.
In order to be effective, debt recovery needs to be carefully thought out. At LandlordSolicitors.com, our advice is always tailored to individual circumstances. We can advise landlords on the best course of action to take and crucially, when to take it.
If you would like to contact us for an informal discussion, please drop us a line to see how we can help.