What Happens if I Can’t Pay Rent?

If you have missed an expected rental payment to your landlord, you are now considered to be in rent arrears. Whilst this could be a result of reduced hours, a fluctuating income or a host of unfortunate circumstance the matter can be resolved.  But what happens if you don’t pay rent? Well aside from thinning the property owner’s wallet, if left unaddressed eviction proceedings could begin. Of course, knowing what to do if you can’t pay rent can help the tenancy resume somewhat normally, allowing you to address your financial situation.

Payment Plan for Rent Arrears

If you begin to accumulate rent arrears it is essential that you contact your landlord as soon as possible to address the situation. Whilst we recognise that this may not be the most compelling situation to put yourself in, transparency will only work in your favour and show the landlord that you are working with them, rather than looking to avoid making future rental payments. To this end it may be possible to reach an agreement with the owner of the rental property to split the owed amount over future rental payments, allowing you to more easily manage your financial obligations without fear of homelessness or legal action.  

Naturally the eviction process can be costly and time consuming to say the least and it is in the best interests of both parties to resume the tenancy agreement. Therefore if a payment plan is arranged with the landlord it is imperative that this schedule is adhered to, with any details on the frequency of the repayment and the amount due each time being specified in writing and signed by all concerned.

Unfortunately however, this may not be possible for everyone, and where a compromise can’t be reached, the tenant should detail their communication with the landlord; making the payments that they pitched to the owner. Each repayment made to the landlord should be recorded so your efforts to settle any rent arrears can be shown should court action be pursued.

Can I Get Help Paying My Rent Arrears?

If the tenant is facing a particularly difficult financial situation and is eligible for financial support, it is possible for these payments to go directly to the landlord through a third party deduction. Whilst these are typically imposed when a tenant is in receipt of financial support and has accumulated at least 4 weeks of rent arrears, the deduction aims to prevent the tenants from facing any further action as a result of their debt, whilst ensuring the rent arrears don’t increase. 

It is also possible for a tenant to obtain an advanced payment if their application for rent arrears is successful. Whilst there is no guarantee that this amount will be sufficient to cover any outstanding debt, it will certainly help the tenant address their situation.

Can My Landlord Evict Me for Rent Arrears?

It is important to note that with the current on-going COVID-19 pandemic multiple changes have been made to the amount of notice that is required to be provided to a tenant before eviction proceedings can begin.  Whilst under “normal” circumstance the landlord would only be required to give the tenant eight weeks’ notice when looking to pursue eviction, the Coronavirus Act 2020 has increased the minimum amount of notice that must be given to at least 6 months, until the end of May 2021.

However, if you do receive notice that your landlord is seeking to evict you it is essential to remain calm and remember that there is a lengthy procedure that must be followed, affording you time to potentially come to an agreement, or accrue the amount needed to settle the debt.

Section 21 Notice for Rent Arrears

With this being said if the tenant has missed any rental payments towards the end of the tenancy period, or if the amount of unpaid rent is not excessive, the landlord may issue the tenant with a section 21 notice. Commonly referred to as a no fault notice, a section 21 simply states that the landlord has outlined their intentions to reclaim the property at the end of the rental period. Because of this the owner of the rental property does not have to provide the courts or tenant with any justification for serving such a notice, as at such a point the tenant would have been expected to move onto another accommodation anyway unless another agreement is signed. As this does not seek to evict the residents of the property due to their arrears even if the tenant was to repay the full outstanding amount, possession of the property would still be transferred to the landlord once the section 21 is enacted.

Section 8 Notice for Rent Arrears

Unlike a section 21 notice, if a landlord chooses to issue a tenant with a section 8 notice of eviction they will have to site the specific grounds on which the tenant has broken the terms of the tenancy agreement. If the tenant has accumulated over 8 weeks of rent arrears the landlord is able to specify ground 8 of the notice. However, if the amount that is owed to the landlord is less than eight weeks rent, the court will typically postpone an eviction to further allow the tenant time to settle the rent arrears. If there is a significant amount of missing rental payments the landlord may also seek to repossess the rental through grounds 10 and 11 of the notice; however it is worth noting that these grounds are more poignant if the tenant consistently neglected to pay their rent.

Can I Stop Paying Rent?

It is essential for tenants to understand that under no circumstance can they withhold rent from their landlords. If you are struggling to meet the required rental payments, refusing to meet this legal responsibility will only serve to increase the amount of rent arrears and give the landlord a far more compelling case for eviction.

 If the amount of missing rental payment becomes significant enough, the landlord may be able to have a county court judgement or CCJ issued against the tenant. However it is worth noting that is a tenant receives a claim letter from the county court they will have a period in which to either settle the outstanding amount, or curate a repayment plan with the property owner. If the tenant fails to come to an agreement with the landlord, neglects to pay the arrears, or ignores the notice then the CCJ will remain on their credit history for 6 years, allowing the landlord to take measures to recoup any losses during this time. This will also act as a significant blemish on the tenant’s credit score, with the CCJ being highlighted in referencing checks with future landlords, making it far harder to find new accommodation.

What if I Have a Guarantor?

Mostly seen when the landlord is renting to full time students, tenants that receive benefit payments or those with a poor credit history, if the tenancy agreement demanded that the occupant of the property obtains a guarantor, this extra party will be liable to pay any rent arrears providing the tenant fails to settle the debt.  Whilst a guarantor would be subject to checks similar to those seen across the tenant referencing process, ensuring that they have the sufficient income and historical ability to pay off their lines of credit, this is by no means justification for the tenant to become dependent on this party.  Typically a guarantor will take the form of a relative or close friend, often giving the occupants of the property more incentive to stay up to date with their payments.

Of course, if the tenancy does have a guarantor in place, this will reduce the resident’s risk of exposure to the rent arrears; with the relationship between the tenant and guarantor making it far more possible for a mutually beneficial repayment plan to be established. However, it goes without saying that no one would appreciate being surprised with a bill for hundreds of pounds, therefore if a tenant is experiencing financial hardship and believes they may fall into rent arrears they should honestly communicate the situation to not only their landlord, but their guarantor.

Typically, if a landlord has not received an expected rental payment they will contact the tenant in writing in an effort to clarify the situation and establish when they can expect to receive the rental arrears. Once this notice has been sent, if after 14 days the tenant still has not made payment to the landlord the owner of the rental property can contact the guarantor requesting payment in absence of the tenant doing so.  If after this the rent arrears are still not cleared the landlord can begin taking steps to take back possession of the property.

Losing Your Tenancy Deposit

Whilst the tenancy deposit is more commonly associated with a landlord being able to recuperate the costs of any necessary remedial work or replacement furnishings at the close of the tenancy period, the circumstance that allows a rental property owner to make deductions from the taken amount is far broader.

This will not be applicable to all tenancies; however it is far more common for a landlord to request a security deposit from their new tenants at the start of a tenancy, despite their being no legal obligation for them to do so. However, for the landlords that do choose to take a tenancy deposit from their tenants, they are able to offset any losses they incur through missing rental payments, through reducing the amount of the security deposit that would be returned to the tenants.

However, it is worth noting that this may not be the most viable option for landlords, especially if the occupants of the rental property have accumulated a significant amount of rental arrears.

Additionally whilst under certain circumstance the owner of the rental property would physically safeguard the tenant’s deposit, if there was any dispute over the amount taken, the full amount would need to be handed to the appropriate government approved tenancy deposit scheme, preventing the landlord from simply lining their pockets as they see fit. Naturally, if this is being pursued because the tenant is in rental arrears, the evidence the landlord can employ for the missing rental payments will more than likely be compelling enough for the debt to be settled.

It is also essential for tenants to keep in mind that simply because they have a tenancy deposit in place, their obligation to make regular rental payments is not nullified. Whilst a tenant could technically have rental arrears covered by the requested amount, it certainly wouldn’t resolve any significant rental arrears thanks to the cap on the amount landlords can take for the deposit.  With the implementation of the Tenant Fees Act 2019, the amount that landlords are able to take from their tenants as a security deposit has seen a limit. Helping to prevent tenants from being subject to unreasonable and excessive fees prior to moving into a property, the act dictates that this limit is dependent on how much the occupants are expected to pay in rent. With this in mind, if the amount that the tenants pay each year in rent is over £50,000, the tenancy deposit can be up to the equivalent costs of five weeks rent. If however, the annual rental charge for the property is over this amount, the landlords can ask for up to six weeks’ worth of rent for the security deposit. As made evident by these limits, the tenant should never rely on this reserve to cover their rental payments, especially as not only does the deposit only realistically cover a single months of missing rent, but because the landlord wouldn’t be able to recuperate this loss until the close of the tenancy.  

It also goes without saying, but any tenants that treat their security deposit with such disregard will be highly unlikely to receive a glowing reference from the landlord when they move onto their next rental accommodation. Additionally, with the tenancy deposit being a somewhat small amount when regarding rental arrears, if there were any damage to the rental found that goes behind fair wear and tear, it is likely that the tenant would have to make additional payments to the landlord to cover these costs.

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