Landlord -v- Tenant Debt

Since Covid and the Government’s temporary ban on evictions, it is fair to say that tenant debt is the most prolific in the debt collection industry.  During 2021, I would say at least a third of all clients I see have either a commercial or residential tenant arrears that they need help with.

Often, the companies that claim to check the tenants don’t pick up vital information, such as insolvency or county court judgments.  And even when the tenant checks are good, circumstances can change after they sign their tenancy agreement.  For instance, they might lose their job or perhaps enrol in too many other financial commitments.

It might be worth considering a tenant guarantor, but it is also recommended to do some discreet checks on the guarantor as well.  You could use the insolvency register and registry trust to look for county court judgments.  Also the Land Registry will let you know if they own their own property.

Bad tenants will usually start paying a little short, and this will gradually get worse as the weeks and months go by.  A landlord will probably want to help the tenant at first and try and work with them.  But over time, realisation will kick-in that there are now months of arrears, and the problem is compounding.

Covid was especially bad because evictions were paused, and many bad tenants unfortunately took advantage of this.  But once you have got the tenant out, they can often abscond and hope you will never find them.  It is usually quite easy to find the debtor nowadays, but it is still difficult to get your money if they haven’t got a job – and don’t want to pay the debt.

Some landlords are just happy to get their property back, but others wish to pursue the debtor.  Depending on the debtor’s circumstances, it is perhaps beneficial to consider a payment arrangement.  If the debtor has assets or a job then it is worth considering proceedings but using a debt collector or obtaining a county court judgment can be expensive so all options should be carefully considered.

If you do wish to pursue your tenant debt, you may need to trace your debtor if they have absconded, and there are some reliable tracing companies about, but do your research first.

RECAP

  • Check the tenant out

  • Check the guarantor out

  • Monitor them occasionally

  • When things go wrong don’t let the problem compound

  • If the debtor absconds try a tracing agent

  • Once located serve a polite letter and ask for your money back

  • If the debtor doesn’t comply consider legal action if they have assets

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