As landlords, we do not have any responsibility for our tenants’ finances.
However, if our tenants gets into financial difficulty they may struggle to pay the rent – which is very much our concern!
In my years as a landlord I’ve learned what to look out for and am usually able to pick up the early signs that my tenants may be getting into debt.
- Tenants avoiding your calls and/or letters;
- Piles of unopened post (many that look suspiciously like bills) when you visit the property;
- Tenants never having credit on their phone – not even for texts.
Recently, one of my tenants became a victim of the recession.
The company she worked for went into administration and she lost her job. She missed a rental payment but as she had always worked did not know how to go about getting assistance from the local authority.
When I managed to make contact and talk to the tenant, I helped her to claim the benefits to which she was entitled and now she is back on track. She even has a schedule for repaying the arrears.
If problems do arise, encourage your tenants to talk to the local authority – in most cases this would be the Housing Options team. Local authorities have a vested interest in helping a tenant stay in their home and they will know the correct local agencies to help with debt management. They also have a lot of influence with the utility companies and can often get debts cancelled.
You might also want to consider suggesting your tenant opens a credit union account. This will give them access to a low-cost banking system where they can:
- Start regular but affordable savings plans (which could be used as a deposit when any local authority bond expires);
- Set up direct debits for utility bills – this is the cheapest way to purchase domestic energy;
- Obtain access to responsible borrowing;
- Take out contents insurance.
The benefit to you is that some credit unions are also able to ‘ring-fence’ LHA – if you’ve not been able to arrange direct payment that is. This means that they can earmark any funds coming in from the local authority as Housing Benefit or LHA and ensure that it only goes to the landlord for rent.
The tenant cannot use it for anything else, and crucially it cannot be consumed by bank overdrafts or swallowed up by other debts or Direct Debits.
The only catch is that the landlord generally has to pay for the service – but in my experience a few pounds for guaranteed rent is much better than tenants falling into rent arrears.
As far as I am concerned, helping your tenants when they get into financial difficulty is both morally and ethically right as well as making good business sense. A previously good tenant receiving financial help is far better than no tenant at all or a tenant you do not know. Any arrears your tenant has built up will remain if you seek possession and costs and will continue to rise throughout the court process; a new tenant could rack up more arrears and you very rarely make back rent lost during a void.