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.

Yorkshire Post - Property - - PROPERTY -

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.

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