Strategies to keep tenants on track with rent payments
“Is buy-to-let worth it?” is a question you may ask yourself when your tenant is late with their rent. After all, you still have your mortgage and other costs to pay. You’ll need to chase the tenant, discover why the rent payment is late, and then decide whether you should cut them some slack or begin the eviction process.
The majority of landlords who question if it is worth investing in buy-to-let property are those who suffer from late payers. When a tenant is late paying their rent, it hurts your finances, bites chunks out of your free time, and could damage your reputation with your mortgage lender. However, there might be a reason to cut the tenant some slack and work with them to resolve this financial issue.
Why does a tenant pay their rent late?
In our experience, there are three main reasons why tenants pay their rent late. Which it is may have a bearing on how you want to proceed, and how you proceed.
Forgetful tenants
It is one of the most common excuses you’ll hear for late payers. They simply forget their rent payment is due. They are busy people, and life accelerates past them. These tenants will usually answer your call and will have apologised for the late rent before you have the chance to explain why you are calling. Usually, once reminded the tenant would pay within a day or two.
Tenants who put rent at the bottom of their list of priorities
It is the worst sort of late payer. The tenant who chooses to put other priorities above you. Often these aren’t priorities at all. The nightmare payer includes takeaways, clothes shopping, and nights out on the town at the top of their budget list, and demotes rent to near the bottom.
This type of tenant is unlikely to take your calls, or answer emails. When you do finally get to speak to them, they will probably ask for more time to pay. Often, they’ll beg you to bear with them until their next payday. That could be a month away, by which time they will be a month in arrears.
You’ll need to explain the problems this causes you, and remind them that they are breaking the terms of the tenancy agreement. You can’t wait for a month. The bank won’t give you a month’s grace on your mortgage payment.
If you have a late payment penalty clause in the tenancy agreement, tell the tenant that you are putting this into action. Every day they delay payment, their refusal to pay will cost them more money.
You can be assured of one thing with this type of late payer: their mindset is unlikely to change. They are likely to pay late every month and even fall into arrears. It is this type of tenant who is also the most likely to cause property damage. Handle with care, but be prepared to begin eviction proceedings, or look for another tenant as this tenancy draws to a close.
Tenants whose circumstances have changed
If you have a tenant who has always paid their rent on time, and suddenly they are late paying, the chances are their circumstances have changed. You may need to treat this type of tenant with kid gloves. You could find yourself drawn into a highly-charged emotional situation.
Common changes of circumstances might be temporary, semi-permanent, or permanent. You’ll need to establish which to figure out how to proceed. For example:
- A tenant who has had a bereavement in the family may be in short-term financial difficulty (e.g. had to pay for funeral costs) as well as mental turmoil
- A tenant who loses their job might be employed in a new position within weeks
- A marriage break-up could have lasting repercussions
Should you be lenient, or be tough?
The landlord/tenant relationship is a professional one. You should be friendly with your tenant, but this doesn’t mean being friends.
If your tenant always pays late, then you should be wary. It could be a sign that the tenant doesn’t put their rent at the top of their list of financial obligations. If a property inspection provides an indication that the tenant spends their money on ‘luxuries’ (for example, a rack of shoes with price labels still attached), be very careful. It is the type of tenant that could be about to fall into financial difficulty.
The question of whether to cut the tenant some slack depend on circumstances; though whatever the tenant’s circumstances, the rent must always be paid.
Giving the tenant extra time to pay amounts to a personal loan from you to them is an option you may wish to consider. If you would be willing to lend them £1,000 while they get their act sorted, then work with them.
However, explaining the situation to the tenant and letting them know that late rent payment could lead to penalty charges and eventually eviction tends to get the situation corrected sooner rather than later. Be firm, but be fair. The stricter you are with late payers, the easier they are to deal with.
Of course, the key strategy to ensuring rent is paid on time every month is to get it paid automatically. If your tenant isn’t paying their rent by direct debit, you should encourage them to do so.
Contact one of our team today on +44 (0)207 923 6100. Our property experts are here to help you find the best property investment opportunities. You’ll also find that our investment experience extends beyond buying and selling property – our consultants will happily discuss how to maximise your rental income profit. And maximising rental income profit is what makes buy-to-let worth it.
Live with passion
Brett Alegre-Wood
