This is the first post looking at the ten most common tenancy agreement breaches by tenants, as identified by Direct Line in their survey, which I discussed in the introduction to this series.
The Direct Line survey gives the percentage of tenants who fall into arrears as 25% – which is pretty high. One in four tenants are likely to do this.
But what are the consequences for tenants of failing to pay rent?
Increased risk of eviction
There are two main ways that landlords evict tenants –
- via the special ‘rent arrears’ ground (ground 8 in Schedule 2 of the Housing Act 1988) or
- via the section 21 procedure.
To use the rent arrears ground you need to be in arrears of two months or more (eight weeks if you pay weekly) both on the date of service of the notice and on the date of the court hearing. So there is scope for you to go into arrears but keep your arrears at under two months in order to avoid this ground coming into play.
Many tenants do this, but there are good reasons not to. The most important is that your landlord may get so fed up with you that they refuse to renew your tenancy at the end of the fixed term and decide to evict you using the section 21 procedure.
Provided the landlord has set this up properly there is no defence. So if you want to stay in the property long term, it is not a good idea to antagonise him.
Negative impact on your credit rating
So far as I am aware, in most cases, the fact of failing to pay rent per se will not impact on your credit rating. However, if your landlord obtains a CCJ for the rent arrears through the courts,this will. And it will impact on your ability to obtain another tenancy later. Few landlords will want to take on tenants who have CCJs for failing to pay rent.
The prospect of poor references
Not all landlords will take up references (although all landlords SHOULD do this!) but if they do, taking a reference from the former landlord is common. Again, if your landlord reports that you are a poor payer, this will put off most landlords.
Conclusion and advice
If you are renting property, you generally do not have long-term security of tenure. So you need to make sure you do not antagonise your current landlord or do anything which will put off future landlords when they are checking you out.
Having accommodation is hugely important – if you don’t have anywhere to live this can have enormous negative consequences for your life, and for your children (if you have any).
Tenants should ALWAYS prioritise the payment of rent over everything else. If you are worried about spending the money before your rent day – arrange for your rent to be paid by standing order the day after your salary goes into your bank account.
Of if you are on benefit, do everything you can to ensure that the money reaches your landlord. Benefit offices will not normally pay direct to landlords but you can arrange for this to be done via a credit union or Tasker Payment services.
Next time I will be looking at smoking.
NB If you are a landlord whose tenants are failing to pay rent, you will find free guidance here.
Jon says
September 22, 2016 at 9:13 AMGood points raised there Tessa thanks for that.
A couple of things (as the blog is titled ‘Penalties’):
1) Late payment charges – I see these in the vast majority of tenancy agreements. Do you have any thoughts on what would be considered a reasonable clause?
2) References – it’s also my understanding that credit referencing agencies don’t include rent in the same way that mortgage payments (although I am unsure where to find this information) However you are probably aware that there is recent talk of doing so bit I’m not sure if this will go ahead or if it would need legislating for?
Also credit referencing aside, a prospective landlord is likely to contact previous landlords anyway. Correct me if I’m wrong but wouldn’t most private landlords and agents ask for addresses and landlords over past x years and contact landlords directly? Certainly in the PRS this could sting you, and I’ve even seen arrears from private tenancies affect people’s ability to secure social housing (although whether this is legal or open to challenge I’m currently unaware)
Audrey Wright says
September 24, 2016 at 12:27 AMJon, as far as I know rent payments are not on the credit report, yet. Though Experian are making a big push to include them in their records. As far as I see it, it can only be good for you to have it in there.
Honestly, I think late payment charges are not the solution. Making a tenant pay more, when they are already falling behind doesn’t seem like the logical pick.
Tessa Shepperson says
September 22, 2016 at 10:01 AM1. The clause, to be valid, must be fair and reflect a genuine expense to the landlord. The landlord can’t use the late payment as an excuse to make more money out of the tenant. PARTICULARLY if they already have a clause for interest on late payment as then they would be charging twice. Which is unfair and unenforceable.
2. I think there is talk of this happening but I think it would need to be with the tenant’s consent at the moment.
3. They should do. That’s my advice to landlords anyway. And to speak in particular to former landlords as they will not be anxious to get rid of the tenant and so unwilling to give negative information. So tenants need to take care to have a good record going back several years.
Dave says
September 22, 2016 at 10:56 AMMy understanding is that possession proceedings/obtaining a possession order/bailiff warrant does not adversely affect a tenant’s credit rating (although if the court order’s the tenants to repay the landlord the court fee and they don’t, the landlord could then apply for a CCJ if he wanted to, which would. Similarly the landlord could obtain a CCJ for rent arrears after the tenancy has ended as you say).
However, with a Section 8 ground 8 notice my understanding is that the landlord can obtain a money judgement for rent arrears along side the possession order in the same proceedings?? And if this is obtained this does affect the tenants credit rating?
Just to mention late payment charges as per the comment above. Note these are not ‘rent’ although some landlords/agents just add charges/fees to the ‘rent account’. These can then be contested as to whether a tenant has a certain level of ‘rent’ arrears or not. Also as Tessa said, my understanding is that any charges can only be to compensate the landlord/agent for losses that have been reasonably incurred; if they’re not the charges could be contested as an unfair contractual term and so could be unenforceable.
Tessa Shepperson says
September 22, 2016 at 11:09 AMYes, landlords CAN apply for a CCJ for the rent arrears outstanding at the time of the court hearing in a rent arrears claim – they can do this even if the tenant has reduced the arrears to below the two months level needed for a mandatory ground eviction order.
The CCJ will only affect the credit rating however, I understand, if it is enforced through the courts.
I agree that charges do not constitute rent and should be left off the rent arrears schedule. They will not count towards the rent arrears needed for a claim under ground 8.
Mat109 says
September 22, 2016 at 11:54 AMOnly thing I would prioritise over rent is council tax – at the risk of getting a criminal record rather than a CCJ.
Jill says
September 23, 2016 at 10:56 AMFor a short-term money problem I would prioritise rent over council tax without hesitation, assuming I have a private landlord. Getting a criminal record from council tax arrears takes years (and for my local authority, willful refusal to pay), and councils are accustomed to working with people who need payment plans to pay off arrears.
Many councils will delay enforcement for a while if you show them that you are taking action to deal with your situation (taking debt advice, claiming benefits if appropriate, etc). Not communicating with the council about the problem will likely mean huge fines and fees for bailiff instruction and the like, but even that is cheaper than being evicted.
For a longer-term problem getting help sooner rather than later is a very good idea.
Tessa Shepperson says
September 23, 2016 at 11:31 AMI agree – private landlords will often be less willing to negotiate than the Council. And even if you do get prosecuted, it won’t render you homeless.