Arrears
- Any Money remaining unpaid by the tenant following the due date as in the tenancy agreement.
- A landlord who is the client of a letting agent can also be in arrears if he fails to pay money to an agent for e.g. maintenance. Technically this should never happen as the rules on letting prohibit agents from using in-cleared funds. However, see also Agent of Necessity permitting agents to act without authority or cleared funds. This comes under the topic of lending for which an unauthorised lender's license is required.
- An agent can also be in arrears if he fails to pay his client landlord on time following receipt of cleared funds e.g. rent.
- Landlords should be kept informed of any significant arrears. This is particularly important if the landlord has a rent guarantee insurance policy- the insurer will need to be notified within a specific time-frame that arrears exist to avoid invalidating the insurance terms and conditions
- Tenants should be contacted to remind them of the arrears at regular intervals but without harassing them by telephoning tenants at work and leaving a message indiscriminately with a workmate or their boss thereby breaching rules of confidentiality.
- When a tenancy agreement makes provision for interest on late payments this must be calculated on a daily basis and added to the statement of account for the landlord and tenants. It might be prudent to use this as a lever to prise the correct amount of rent with the promise to forego the interest if the tenant cooperates. Should the matter go to court no such leniency is likely to be tolerated by a landlord due to the amount of preparation required to attend and provide documentary evidence.
- Guarantors should be informed quickly of any arrears as they are likely to want to correct the situation before it escalates costing them yet more money.
- Should a third party assist the tenant or may a payment on their behalf there is a risk that this creates a separate contract with the third party (see consideration). To avoid this murky situation the agent simply provides a duplicate receipt clarifying that the payment is received from the payer as" agent for the tenant" and to avoid doubt the tenant's name and address should be entered on the receipt and signed by the named tenant's agent and countersigned by the landlord or the landlord's agent.
Published: 5 November 2013
Last Updated: 17 November 2021