If your tenant is not paying rent, this can have a significant impact on your cash flow and may even affect the underlying value of your investment.
If you have a lease or a tenancy agreement (including a verbal agreement), your tenant will be contractually obliged to pay you rent. How you go about trying to recover what you are owed depends on the circumstances.
Section 8 claim
This is a combined claim for possession of the property and recovery of any rent arrears. Ordinarily the tenant will need to owe at least two months’ rent before you can serve a section 8 notice.
If you are successful in your claim then the tenant will usually be ordered to vacate the property and to pay you all the rent which is outstanding.
A money claim is issued in the County Court for the outstanding rent only, although this may include a claim for interest and costs if these are included in the tenancy agreement.
The advantage of this kind of claim is that it is usually more difficult for the tenant to file a defence, as the other matters relating to the tenancy, such as alleged disrepair at the property, are not directly relevant.
The disadvantage is that the tenant will remain in the property. They may of course fail to pay rent in the future and you will have to start the whole process again. However, if the tenant has already left the property, this is probably the way to go.
A new Pre-Action Protocol came into force in October 2017, which applies to any business (including sole traders) claiming payment of a debt from an individual, even if that individual is trading as a sole trader. This Protocol sets out the steps that ought to be undertaken before a money claim is issued in the County Court, further details of which can be found on our Debt Recovery page. As the Protocol does not exclude debts claimed pursuant to a lease, landlords are advised to consider whether it applies before issuing a money claim.
Since October 2015, if the tenant owes at least £5,000 in rent arrears then it may be appropriate to serve a statutory demand on them. This is a formal demand for payment within 21 days, failing which the person who served the demand is able to issue bankruptcy proceedings against the tenant.
This can be particularly effective where being made bankrupt will have a negative impact on the tenant’s business or other interests.
Once you have obtained a County Court judgement, you may still need to enforce this before you actually see any of your money. There are a number of options which might be appropriate.
If the tenant is employed, you may be able to apply for an attachment of earnings order to make deductions against their salary. If the tenant has a bank account which is in credit, you may be able to obtain a third party debt order requiring their bank to pay you direct.