Letting Agents

There must be an election coming – parties are lining up to give landlords a good kicking.

 

Whether it’s the Labour Party with their ludicrous talk of rent controls and a National Landlord Register or the recent Green Party leader, Natalie Bennett, making a complete fool of herself on the radio when trying, and failing miserably, to explain how withdrawing landlord interest tax relief will solve the housing crisis, landlords could be in for a nervous time depending on what happens in May.

A national register of landlords was proposed by the last Labour administration along with the a registration scheme for letting agents and neither ever saw the light of day. All it would do is penalise good landlords (it’s not going to be funded by anyone else but landlords is it?) and it would drive rogue landlords further underground – if they are bad landlords breaking all current legislation they are hardly going to come forward to register for this scheme are they? The Scottish scheme had only achieved 75% compliance six years after its launch. And anyway, there is plenty of legislation to encourage landlords to conduct themselves well it is just a matter of allocating enough resources to enable enforcement.

As for withdrawing interest tax relief – what a very poorly thought through proposal that is! Can you imagine the housing crisis that would cause as landlords sold up to get out of the market? Who else would fill the social housing gap? What would happen to ‘Generation Rent’ who can’t afford to get on the housing ladder and are forced to rent? The effect on house prices would be political suicide for any party that put that one through.

There are something like 1.6 million private landlords in this country – that’s quite a constituency. Many MPs are BTL investors too so vested interests start coming in to play (don’t they always). One in ten Labour MPs are BTL investors so even Labour wouldn’t go that far.

It’s Silly Season from now until the election and for all parties this means a certain amount of grandstanding to their core voters. None of them have really committed themselves to a programme of social housing to undo the damage of Thatcher’s Right to Buy scheme. Local authorities used it to raise cash by flogging off their housing stock without replacing it thereby forcing tenants in to the private rented sector. Such a commitment would create wealth in the country through jobs and bring about a natural rent control through a rebalancing of supply and demand. Now that’s a policy that makes sense and no one can argue with but it makes less of an impact unless it involves giving someone a good kicking.

 

Late rent payments – how to approach them (and how not to)

 

I was recently introduced to a black-eyed landlord who proudly revealed that he had got in to a fight with one of his tenants. This came about as a result of him implementing his policy of asking for late rent just once and then ‘popping them one’ if he had to go back and ask again. While you might applaud the general idea of a ‘no-nonsense’ approach this ‘One Strike and You’re Out’ method is a little too literal for me.

I read recently of a landlord in the States that took an equally extreme approach to collecting his late rent. Let me explain. Ronald Kronenberger of Ohio was indicted for spanking a tenant that owed him $2,000. I suspect that in his own mind he was probably combining the sometimes onerous task of doorstep rent collection with one of his hobbies. But it didn’t stop there. During the proceedings a disabled man that worked in Kronenberger’s grocery store came forward and said he had also been spanked four times for minor misdemeanors.

Collecting rent and managing late payments can be done in a more conventional way than the ‘crime and punishment’ approach of the above two landlords. As in all aspects of tenancy management treating tenants respectfully goes a long way in cementing a positive relationship that enables early resolution of problems before they escalate out of control.

The Rentcollection approach is to try and get tenants to prioritize their rent over all else so we text them rent due reminders before they pay their rent and rent payment acknowledgements after. When their rent is late it is usually for a normal reason – cashflow problems being the most common. We provide them with another opportunity to make a payment easily with a link to our website where we can take a card payment. This works well for us and so to date we’ve had no need to reach for the boxing gloves or wooden spoon.

While most landlords may well have a wooden spoon and perhaps even a pair of boxing gloves most won’t have online card payment facilities to point their tenants to but the point here is about making it easier for tenants to pay their overdue rent. Making it easier makes it less likely that late payments become arrears, arrears become evictions and evictions become voids.

So what can you do? Don’t assume they are going to proactively follow up a missed payment. Send your tenants your bank details with a request for payment. They may not know yet that their payment hasn’t been made so you may be doing them a service in telling them. Speak to them in the right tone with a concise, matter-of -fact, friendly, non-judgmental approach and agree a date by which the payment must be made. If this payment isn’t made, simply ask them why and if necessary remind them that it is part of their contract to make payments on time and that they have breached their contract in this respect.

At this point remind them that up to now you have not resorted to mentioning the contract but now you have you will have to ask them to stick to it in the future. They may have temporary financial problems but you mustn’t let their financial problem become your financial problem. A reasonable tenant will accept this and so at this point, you should consider serving a Section 21 Notice and explain that this is not an eviction notice but a precautionary measure to protect your interests in the event that the rent isn’t paid. This should be served before the next rent day is due so that no time is lost. And that is where you leave it. By all means continue to follow-up if the rent doesn’t materialize but at least you know that the Section 21 has been served and a date set after which you will seek a possession order.

If the tenant doesn’t make the missed rent payment but does make the following month’s then that probably indicates some temporary hardship and a payment plan over however many months you decide should be agreed. In time, your rational approach will have recovered the missed month’s rent, kept a good tenant and created more goodwill than any clip round the ear or spanking good ever achieve! Of course you could always take the hassle out of chasing late payments and talk to us instead!