Rent arrears cause additional worry and stress for landlords, and they will turn to their agents for answers. How can letting agents manage rent arrears?
With the average rent in the UK continuing to rise, with a 6.7% year-on-year increase from June 2023-24, and the cost of living crisis still present, the number of rent arrears for the private rental sector is growing.
When rent arrears occur within a tenancy, landlords typically look to their agent to resolve the issue and agents must do so compliantly - whether that’s through mediation or repossession.
But what are rent arrears? What steps do letting agents need to take to ensure the management of these cases is compliant?
- What are rent arrears?
- Are rent arrear cases increasing in the private rental sector?
- Let only vs fully managed letting agents - who is responsible for rent arrears?
- Section 8 or Section 21 - which is correct for rent arrears?
- Download now: Five steps agents should take if the tenant is in rent arrears.
What are rent arrears?
If a tenant misses, or is late in paying their rent, they are in arrears until the payment is made.
Research from Reposit has found the average rent arrears claims in the first quarter of this year were £1,816, a 27% increase from last year.
For letting agents, especially if they are managing the property, they are typically in charge of chasing a tenant's payment for the landlord.
When an agent is responsible for collecting rent on behalf of a landlord, there are necessary steps to follow including rent reminders, chasing and payment reconciliation, and in the case of arrears, possible preparation of eviction notices.
For Goodlord customers, our rent collection solution sends reminders and will chase a tenant for payment if rent is late, helping to save agents time.
Goodlord will manage the letting agent’s payments whether it is made on time, or the tenant is in arrears, saving four workdays every single month, per 100 tenancies.
Are rent arrear cases increasing in the private rental sector?
The number and amount of claims made for rent arrears in 2024 has increased steadily, with 18% of tenancies ending due to unpaid rent.
According to Reposit, arrears claims for rent have been over £1,500 through the first quarter of 2024, with the highest average hitting £2,097 in February.
Further research from Bluestone Mortgages found that one in 20 tenants was in rent arrears over the last 12 months.
Nearly one in four UK adults, 5 million people (24%), have missed one or more rental payments in the last 12 months. This is an increase of 18% since 2023.
The English Housing Survey 2022-2023 reported that over a year 74,000 of private renting respondents were in rent arrears. Tenants living in London were less likely to report that it was easy to pay their rent out of anywhere in England.
With rent protection services, such as Goodlord’s Rent Protection and Legal Expenses Insurance, letting agents can support their landlords through rent arrears, ensuring they’re not out of pocket while the issue is resolved.
Let only vs fully managed letting agents - who is responsible for rent arrears?
Depending on the service provided by their landlord, a letting agent could be responsible for managing arrears for the property.
Let only letting agents are not responsible for managing cases of rental arrears. Landlords will be responsible for rent collection, maintenance of the property and if the rent is late, as outlined in your terms of business agreement
If a letting agent is instructed on a fully managed basis, they are responsible for all aspects of the tenancy process, including rent arrears, if it is set out in the terms of the business agreement.
For fully managed letting agents, they will need to ensure they stay compliant and manage the arrears process so they are prepared if any future action needs to be taken.
Section 8 or Section 21 - which is correct for rent arrears?
If a case of rent arrears has not been resolved and further action is required, letting agents may also need to serve either a Section 8 or 21 notice.
A Section 8 notice can be served if a tenant is in rent arrears, has often been in arrears, and has an assured shorthold tenancy.
If served a Section 8, a tenant has two weeks to leave the property, if they decide to leave. If they do not, letting agents and landlords will be forced to take action further through bailiffs to take repossession of a property.
Agents and landlords can also present a Section 21 notice at any point during the tenancy. However, the tenant has a two-month notice period to move out.
This means a landlord could have four-plus months without a steady income from their property and a letting agent’s income could be affected as a result.
If a letting agent or landlord has served a Section 8 or Section 21 notice, they will need to go to the county courts to receive their money owed.
With Goodlord’s rent protection service, we manage the court process for our letting agents. Whether the property has received a court notice or bailiff appointment to evict a tenant, Goodlord has experience with how long the process can take.
Currently, hearings for eviction notices within the county courts are being listed a minimum of five months in advance.
For bailiff appointments, letting agents and landlords will need to wait a minimum of three months. However, Mortgage and landlord possession statistics have stated the average time from a claim to repossession of property was five months (24 weeks) from January to March 2024.
This means if a letting agent has to wait two months after serving a Section 21 notice to have the tenant evicted, they will then have to wait a further five months to receive the money owed.
With Goodlord’s Rent Protection and Legal Expenses Insurance, a letting agent can protect the landlord’s rent as well as manage the eviction process. Goodlord can handle the admin and processes so agents and landlords don’t have to.
Download now: Five steps letting agents should take if the tenant is in rent arrears
To ensure compliance with this process, letting agents need to follow a series of steps to be confident that rent arrears cases are handled correctly.
