Rental arrears are one of the biggest risks for landlords. While most missed payments are simple mistakes, one late rent payment can quickly turn sour and leave landlords having to pursue further action.
When a tenant first skips a rent payment, it’s important to act quickly and follow the recommended legal steps to protect yourself and prevent issues later down the line.
In this article, we’ll explain how to handle rental arrears effectively as a landlord and share the crucial steps to take to avoid rental arrears in the future.
How to manage late rent payments
When a tenant defaults on their first rent payment, it’s important to act quickly. Consider undertaking the following steps to manage rent arrears.
Issue a payment reminder
When the rent due date passes and no money enters your account, consider reminding your tenant that rent is due. The tenant may have simply changed bank accounts and not set up a new standing order yet.
If you use a software to manage a tenancy, like Rentila, you can issue a late payment reminder manually or automatically. If not, you can send them a polite text or email. Consider waiting a couple of days to see if the payment turns up.
Speak to the tenant
If no payment arrives and your tenant hasn’t responded to your reminder, it’s important to reach out to your tenant to find out what’s going on.
There could be a temporary issue that’s causing the problem (like they’ve lost their job and don’t know what to do). Or they might have changed jobs and are waiting to get paid. A simple phone call can straighten things out.
Keep the conversation as formal and professional as possible, but try to be understanding with the tenant.
If they’ve never missed a payment before and something unexpected has happened, they may be worried themselves. Giving them some grace can keep communication channels open between you and the tenant, which can make it easier to come up with a solution.
Focus on discussing the following:
- Getting an explanation
- Offering solutions
- Agreeing on a payment plan
- Suggesting the tenant seeks independent debt/financial advice (if needed)
Keep records of the communication, as you’ll need this for legal reasons if the situation escalates and you need to take it further. With a landlord management software, like Rentila, you can document calls and other correspondence.
Issue a late rent notice
It’s important to consider issuing a late rent notice. This is a formal notice of the late rent and is an essential piece of documentation should you need to pursue legal action. You should still issue this if the tenant didn’t answer your calls or emails.
In the notice, you can include:
- The amount of rent overdue
- The due date for the payment
- Any terms you’ve recently agreed on (e.g. a payment plan)
- A reminder of the payment terms in the tenancy agreement (which can include the consequences and next steps if rent arrears continue)
Contact the guarantor
A guarantor is a named person on the tenancy agreement who is legally obligated to pay rent on the tenant’s behalf if the tenant is unable to pay.
You can only contact the guarantor if you asked for a named person at the point of signing the tenancy agreement. You cannot ask the tenant for a guarantor once they’ve already defaulted on payments.
It’s good practice to notify the tenant that you will be contacting their guarantor via written notice. Give a deadline for the tenant to get in touch with you to pay the rent before contacting the guarantor.
For example, outline that payment must be made within 5 working days [by date] or you will be contacting their guarantor [name of guarantor].
Understand legal next steps
If you don’t have a guarantor for the tenant, or are struggling to get hold of either party, you can consider:
- Reviewing the tenancy agreement and the rent arrears clauses
- Reading up on landlord-tenant laws relevant to your situation
- Seeking independent legal advice (as needed)
Try not to bombard your tenant with too many reminders or calls about their rent arrears if the rent remains unpaid. Give a reasonable amount of time in between notices to avoid causing the tenant stress at a potentially difficult time.
Tenants can also request ‘breathing space’ from you via a debt advisor. This means you’ll be restricted from contacting them about their rent arrears for up to 60 days. Spacing out your communication can prevent a tenant from requesting this.
Serve an eviction notice
As of early 2025, landlords can still serve Section 21 notices to evict a tenant from a property. You can issue a Section 8 notice at the same time on the grounds of rent arrears.
When the Renter’s Rights Bill comes into force (anticipated for 2025), Section 21 notices will be abolished. The way to evict a tenant will be via a Section 8 notice.
It’s important to follow the process to the line when issuing a Section 21 or Section 8 notice, as a small mistake or missed step can invalidate the notice entirely.
If a tenant doesn’t leave the property after issuing an eviction notice, you may need to apply to the court for a possession order and seek independent legal advice.
How to reduce the risk of rent arrears
No landlord wants a tenant to fall into rent arrears, and there are some ways to prevent this from happening. Here are some top tips to consider:
Undertake careful tenant referencing
When a tenant applies to rent your property, take tenant referencing seriously. Avoid accepting generous offers of rent paid upfront to skip tenant referencing.
Tenant referencing should include an evaluation of the tenants:
- Credit score
- History of fraud
- Outstanding debts
- Employment contracts or payslips
- Proof of benefit entitlements
Consider using an independent agency to carry out tenant referencing on your behalf. When a tenant doesn’t have a good credit score or you’re concerned about their affordability, you may want to ask for a guarantor.
Choose a rent due date wisely
Before finalising the tenancy agreement, think carefully about the rent due date in place. Most people are paid from their workplace towards the end of the month, so it’s best to align rent due dates around this.
However, everyone has a different payment schedule. It’s a good idea to ask the tenant when they get paid so the rent due date can fall immediately after this. If there is more than one tenant, try to pick a date after both tenants have been paid.
This can prevent late payments or tenants falling into temporary rent arrears while they wait to get paid from their place of work (or other income stream, like benefits).
Be flexible on changing the payment due date
Landlords and letting agents can charge up to £50 (unless you can prove it costs more) if a tenant asks to change their payment due date.
However, it’s important to consider how charging your tenants a fee can act as a deterrent. In turn, this can increase the risk of them falling into rent arrears.
For example, if a tenant used to pay rent on the 25th of the month, but gets a new job that pays them on the 29th, they may not request a change in payment date to avoid the fee. This can cause them to struggle financially, and they may end up in rent arrears unintentionally.
By remaining open and flexible to tenants requesting a change in due date, you may be able to prevent missed or late payments.
Ask tenants to set up a standing order
When first signing a tenancy agreement, it’s a good idea to ask your tenant to establish a standing order for the payment. When a tenant pays rent manually, it creates a risk of them forgetting to pay.
Don’t always assume a tenant knows about standing orders, as some tenants may be new to renting or how it works.
Automate rent payment reminders
It’s a good idea to leverage software wherever you can to make managing your tenancies easier. Consider using a software, like Rentila, to automate rent payment reminders for each of your properties.
Set these up as early as possible in your tenancy, so the tenant receives a reminder just before, on the day of, or shortly after the payment due date (if the payment was missed).
Track rent payments
When a tenant misses rent, it’s important to act quickly. Keep an eye on payments so you can take immediate action and potentially prevent the situation from escalating. A landlord management software, like Rentila, can help track your tenants’ rent payments in multiple properties to avoid missing anything important.
FAQs
How far back can rent arrears be claimed?
Landlords can claim unpaid rent up to six years after the rent first became overdue, as stated in the Limitation Act 1980. This means a landlord can submit a claim for tenants who owe rent up to six years after the first missed payment.
To make a claim, robust legal records must be kept, especially tenancy agreements and communication records between the tenant and landlord. Using a software to manage tenancies ensures your records are stored securely in a central database, which can support court proceedings.
Can universal credit pay for rent arrears?
In cases where a tenant is eligible for Universal Credit, or already claims it, a landlord can request that the housing element is paid directly to them. This is known as Managed Payment to Landlord (MPTL) and can only be requested by the landlord if the tenant has rent arrears of at least two months.
Managing rent arrears: Things to remember
When it comes to rent arrears, keep in mind the following:
- Keep track of payments and take action promptly – Consider using software to monitor missed payments and get instant notifications if there’s a problem
- Record all communication – Keep records of all communication between you and the tenant after a payment has been missed
- Don’t bombard tenants with reminders – If they’re in a temporarily bad financial situation, it can be stressful and they may need time to figure things out and contact you with a solution
- Take steps to avoid rent arrears – Automate payment reminders, stay flexible, and maintain good relationships with your tenants to prevent rent arrears
- Follow legal advice carefully – Strict rules are in place to protect tenants, and unfortunately, these can negatively impact landlords if they make the wrong move, so it’s important to check legalities before proceeding
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