Introduction
COVID-19 has caused severe problems for many businesses and those that they employ. Job loss or job insecurity, in turn, can lead to depression. In addition, not knowing how to pay your mortgage or rent understandably can be very stressful for tenants and landlords alike.
Vows for commercial tenants will be telling in March 2022 when the government lifts the restriction on eviction of commercial tenants.
Our high street with even more empty shops may look different in summer as commercial landlords ‘step in and take possession of their properties due to defaulting tenants.
When dealing with tenant rent arrears, you have two categories of tenants:
(1) Those who have the means to pay the rent but won’t pay.
(2) Those who do not have the means to pay.
This article will not address those who can pay but won’t pay.
Like many nations, the British have their weaknesses, but we have our strengths too. For example, when it comes to charity and giving for good causes, we open our hearts to the needy, as demonstrated over and over again.
During the COVID-19 pandemic, landlords had reacted with incredible generosity towards their tenants when in some cases themselves, were financially challenged.
I was humbled by the response and how our members rose to the occasion to help their tenants by writing off rent arrears or reducing the rent.
I ask members and non-members alike to make a small gesture of goodwill towards your tenants again. Would you please read this article in full to understand how you may be able to help your tenant?
Legal Process
Let’s have a look at the process for dealing with residential tenants with rent arrears:
Most tenancies will be “assured” or “assured shorthold” tenancies; either way; you would need to serve a Section 8 Notice on the tenant. For example, most Council tenancies are “Assured,” and Private landlord tenancies are usually “Assured Shorthold.”
Once a landlord serves a Section 8 Notice, the tenant has 14 days to pay the rent. If the rent is not paid as demanded in the section 8 notice the landlord can then go to court.
Going to court using a section 8 Notice for rent arrears, the standard process; you are asking the court to do the following:
- You want a possession order so you can evict the tenant.
- A judgement for the rent arrears ordering to pay the entire debt.
- A judgement for the tenant to pay the court and legal fees
The tenant is usually given 14 days to pay the debt and give up vacant possession of the let property.
Commercial Tenants
Commercial tenants are those who lease shops, offices, or a warehouse it can be any commercial property.
As stated above in March 2022, the government will lift the restriction on commercial tenants.
Most leases have a forfeiture clause which means landlords may be able to lock the tenant out and take possession without a court order (take legal advice before considering this).
Credit to our Government they have done a lot of excellent work so landlords and tenants can work together to understand each other’s financial challenges and deal with things amicably.
I am confident commercial landlords have done as much to support their tenants. However, those who simply do not want to pay will face the consequences sooner or later.
Writing off the debt
A Landlord I know had the following experience: He took one of his tenants (residential property) to court for rent arrears. When he was in front of the judge (the tenant did not attend), The judge asked him: Do you want a possession order, money judgment and your costs?
He thought to himself the tenant does not have any money anyway, so I am not going to get any money.
Why put the tenant in the misery of having a Court County Judgement (CCJ) for the next six years.
Life is difficult as it is why heap more stress on this tenant.
The landlord replied to the Judge, no, I do not want a money judgment; I just need a possession order.
The Learned leaned forward, lowered his glasses and looked at him, and said, “I suppose you know you are not going to get your money from the tenant anyway.”
A wise judge indeed!
Sasha Charles, the Managing director of Landlord Advice UK, one of the leading national tenant eviction companies, said: “For rent arrears claims under section 8 notice over 70% of tenants are unable to pay the debt despite the fact the landlord obtained a judgement for rent arrears and legal costs. If they do not have any money, you will not get any. As the saying goes, you can’t get blood out a stone.”
He added: “Most landlords are happy when they have vacant possession of their property. However, where a landlord can see the tenant has no chance to pay the rent arrears, a landlord has the discretion not to seek a money judgement for the rent or legal costs. So, we encourage landlords not to seek a money judgement where practically it does not benefit them”.
For some tenants, it is a choice topping up your gas or feeding your children. But unfortunately, fuel poverty is a reality for some in our country.
The Moral Dilemma
Every case is different, and I accept in some cases; the only way may be a possession order and judgment for the rent arrears.
I also acknowledge some landlords may too be struggling financially.
If you know your tenant does not have the means to pay the rent and you are in court for possession under section 8. You have the option to request a possession order only and no judgement for the rent arrears or legal costs.
Through your kindness, this will mean the tenant will not be adversely affected by poor credit history. Bad credit history means any loan the tenants may wish to take out will be at an exorbitant interest rate, putting the tenant in further debt.
Like me, those who are of the Christain faith the Lord’s Prayer comes to mind “forgive us our debts, as we also have forgiven our debtors.” Mathew 6.12. For me, it is not a matter of a moral dilemma it’s a matter of my faith.
Author: Peter Ross
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