How do you recover the rent arrears and rent holidays after lockdown?

I’ve been asked this questions a lot and it’s big problem for a lot of landlords. Maybe you’ve given your tenants a rent holiday or maybe they’ve just been unable to pay. Maybe they’ve only paid some of the rent. One way or another, you’ve got to get that money back. Unless you don’t need it, that’s a whole different thing. But if you’re in the other 90% of landlords, you’ll need that money back. 

The problem is, how do you get it back? Where do you start? 

Neale and Stella have asked this today. Both have different situations but the goal is the same… Get the rent back. 

So I’ll share my advice and also tell you what my team at Pink Street are doing to combat the rent arrears. It’s working well so far so hopefully this helps others.

First, we’ve got to remember that all this isn’t our tenants fault. Ok, some tenants are just spongers who are exploiting a terrible situation. Those tenants will get their comeuppance I’m sure. 

But for most tenants, they want to pay the rent. They don’t want to be in arrears, it’s stressful!! So I’ve worked this out into a 5 points for you to follow and hopefully it helps you get the rent back in a timeframe that works for everyone. 

  1. Negotiate a new tenancy. My team at Pink Street just did this with a number of tenants and it was a great success. We had a tenant that was unable to pay their rent due to the lockdown. I won’t mention names but if they’re watching I hope they don’t mind me sharing the story. Anyway this tenant worked in a pub and they were let go pretty much straight away. They had 4 months left on their tenancy so the risk for the landlord was the tenant disappears without clearing the arrears. So we agreed that the landlord would surrender the current AST and start a new one over a longer term. We agreed 2 years at a higher rent so the tenant could pay it back and the landlord knew it would be paid. Win win. So can you start a new tenancy with your tenant? If you can, add the payment plan into the rent. We did the same thing with another tenant for one year too so as long as it’s affordable for both of you, it’s a good way to make sure you have a good payment plan in place and keep your tenant happy.
  2. Reassure your tenant. This sounds obvious and it will become much clearer in the next points. If you reassure your tenant that you understand the situation and you’re there to help them get through it, you become human. Be honest with your tenant and tell them how this situation has affected them. Don’t be needy though, be the rock your tenant needs. Now there’s a reason for being open and supportive with your tenant. It’s a well known problem that tight arse landlords and landlords that are just dicks, don’t get any sympathy and respect from their tenants. The tenant will be less likely to go above and beyond to pay the rent in tough times if you haven’t treated them well. That’s just human nature. Nobody roots for the bad guys! So the first thing you must do before any of the following points will work is open communication and honesty with your tenant. Reassure them that you’re going to work with them to get through this and get back to normal. 
  3. Ask the tenant to suggest the payment plan but steer them to your terms. It’s the oldest trick in the book. Well, not the oldest but it’s pretty old. Here’s a couple of suggestions… “Lets work together and bring the rent up to date within the next 6 months, (or whatever time frame you have) what do you think is a comfortable amount for you each month?” This tells them your timeframe pretty clearly but let’s the tenant feel they have some say in the matter. Or try “When shall we work on getting the arrears cleared? It wouldn’t be fair to ask for it all at once so let’s work out a monthly payment that you’re comfortable with.” Let the tenant know that this isn’t a request to clear it all at once. For a lot of tenants, the rent amount is a subconscious thing. If they can’t pay all the rent they end up paying none of the rent. It’s only when you offer for them to contribute towards the rent amount they do it. This is a good way to make the payment plan their suggestion under your guidance. However you ask it, try to make it the tenants plan. The tenants idea. A plan the tenant is comfortable with. As soon as you start dictating terms, you’ll lose. 
  4. If the tenant doesn’t give you a good enough offer, and please try to be as lenient and logical as you can with that. But if they just don’t play ball, ask them to complete an income and expenditure form. If they’ve been furloughed or working reduced hours, ask for payslips. If they’ve got no income coming into the property, how are they paying for everything else? Ask for as much information as they can provide so you can work out a suitable payment plan. It needs to be affordable otherwise they’ll just fail the payment plan and you’ll be back to square one. Be as lenient as you can. Don’t be greedy. 
  5. Use my guide – 11 questions to ask your tenant if they request a rent holiday. It’s completely free so just grab it. That guide includes a load of companies, institutions and organisations that are offering discounts and free services during lockdown. It helps you lower the tenants outgoings but most importantly it shows the tenant how to apply for Universal Credit. If they’ve been let go, the chances are they’re entitled to Universal Credit. And it can be backdated too. It helps you and it helps your tenant. I promise you, everyone who’s having financial difficulties during lockdown should be applying for universal credit today. That includes you Mr and Mrs Landlord. The trouble is, people don’t think they’re entitled to it but you are. 

My last bit of advice is to try and get the rent back before the end of the tenancy but remember you also have the deposit to fall back on. Ok, you’ll also need the deposit to fall back on if there’s damage too but we all have to hope our tenants are normal humans and they’re going to look after our properties. If you’re having more serious problems with your tenants, the courts are opening up again in a few weeks so you’ll be able to start the eviction process. I’m happy to share all the documents and templates you need for to help get the rent back. Just message me or comment below. If your situation needs more help, comment below or message me and we’ll arrange a more specific conversation about you own situation. You can email me if it’s easier… The email is the same as always,

I’ll reply to everyone