Surviving troubles that bad tenants can cause
Problem tenants can cause misery and financial difficulties for landlords but how do you deal with them? Sharon Dale reports on steps that can be taken to protect investments.
THE rental boom may sound like a licence to print money for landlords but anyone involved in buy-to-let will tell you that it isn’t easy.
More people are renting, but more are slipping into arrears, leaving landlords struggling to pay their mortgages.
According to research by Templeton LPA, a specialist practice of LPA Receivers, the number of court orders to evict tenants is up by 11 per cent and they expect buy-to-let mortgage arrears to climb this year.
Teresa Galley, who runs Doncaster-based lettings agency Galley Properties says that strict vetting criteria and on-going surveillance are the key to avoiding non-payment and a host of other problems such as damage and illegal activity.
It’s a labour intensive approach but one that has paid dividend for Teresa, a former RLA Property Woman of the Year.
“We spend at least a week vetting a prospective tenant and we are very thorough. We do credit checks, validate bank accounts and get employment references and a reference from a previous landlord.
“We’ll also get photographic id and sometimes we’ll ask for previous bank statements.”
Viewings are also crucial in determining whether a tenant is suitable.
“You chat to them and sometimes you think: ‘that’s not what you told me before’. We’re always looking for red flags and we go on gut feeling,” says Teresa.
She also steers clear of DSS tenants, though there are a couple of exceptions and they had to provide a working guarantor who was then credit checked.
Once a tenant has moved in there are regular property inspections. They are carried out after the first month and then every six months after that.
“The inspections are written into the contract and they are useful for assessing how well a property is looked after and whether there are any repairs. They also act as a deterrent. Some landlords have had properties turned into cannabis farms and brothels, but if the tenant knows you will be checking regularly they won’t bother attempting anything like that,” says Teresa.
Checking rental payments is also crucial and as soon as someone is two days overdue they get a letter telling them the rent is late and reminding them that there is a risk that action could be taken.
“If we don’t hear from the tenant within a couple of days then we call them and send another letter telling them that they will be charged £15 for every reminder letter thereafter.
“We do have genuine cases where people have got into difficulty and are keen to sort things out and then our landlords take a view and maybe come to an arrangement for the tenant to catch up,” says Teresa.
“The main thing is not to let things slide. As soon as someone defaults on a payment, you have to sort it out soon for everyone’s sake.”
Getting a good letting agent can help novice buy-to-let investors avoid pitfalls and they also prevent you becoming too emotionally involved with a tenant. But if you want to manage your own properties then Teresa suggests joining the Residential Landlords Association. It costs £75 a year and for that you have access to all areas of the website, which contains a wealth of good advice plus forums and special deals.
“The best things is the advice helpline they run. I’ve used it myself and if that’s all you do all in a year then it’s worth it and costs a lot less than paying solicitors for advice,” she adds.
If you do require the services of a lawyer, she suggests finding someone who specialises in tenant issues as they are much more efficient.
“I have someone who specialises in tenant issues and that saves time and money,” she says.
“I’m afraid that there are tenants who are serial evaders and they know the system. That’s why it is vital if you serve them notice to leave and get all your dates right and if need be go to court.
“I’ve always managed to get the keys before that happens but if money is owed we do make efforts to collect it.
“Some landlords don’t do this but I think it’s really important because if you don’t then it’s sending the wrong message to the tenant. We go for a county court judgment if necessary, even though we may only be able to collect £5 a month.”
But even with all the checks and balances there are some issues that you can’t predict, which is why you must be financially and emotionally prepared.
If you take a large buy-to-let mortgage in a market where there is little or no capital gain then be sure to put down a large deposit.
This will ensure the rent more than covers the mortgage leaving plenty over for repairs, missed rental payments and voids.