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Dear Delia

Dear Delia My client bought a buy-to-let property early this year and found what seemed like good tenants – an unmarried couple.

But three months ago they stopped paying the rent, changed the locks and refuse to speak to my client. He’s paying the mortgage but he’s a builder who is likely to earn less in the winter. He has two other investment properties that are covering costs, but there’s not much left over. What should he do? Delia says: The solution doesn’t lie in taking the law into your own hands. Here to help with this tricky problem are Lee Grandin of Landlord Mortgages and John Heron of Paragon Mortgages.

Have you got a problem for Delia? Email mortgage.strategy@centaur.co.uk

Intermediary Response
Lee Grandin is managing director of Landlord Mortgages

It sounds as if your client is facing every landlord’s nightmare.

The first thing I would recommend is that your client should try to open a dialogue with the tenants. Are they in a position to pay the rent and withholding it because they have a grievance? Are they unable to pay and don’t want to be made homeless? Or are they simply happy to live in an apartment rent-free? Once he has answered these questions, your client will find it much easier to decide on a course of action.

He also needs to speak to his lender. I understand that he is covering the mortgage repayments right now but this may change so the sooner he speaks to the lender, the better. His lender will be much more sympathetic if he keeps it informed of what is happening.

If he is able to discover the reason for the rental arrears, he can decide how to proceed. If there is a problem with the property which is causing his tenants to refuse to pay, I suggest he fixes it.

But if there are other reasons and they refuse to negotiate, the next step your client should consider taking is moving to legal action.

It sounds as though this is the first time your client has had to deal with this type of tenant issue and so I suggest he speaks to a legal firm that specialises in this area. The firm will be able to lead him through the process of serving notice and getting his property back.

Your client really should learn from this experience. I suggest that he carefully vets any future potential tenants by meeting them face-to-face, doing a credit check and thoroughly reviewing their references. A telephone call to their former landlord is also a good idea and a relatively easy thing to do. People often reveal more over the phone than on a piece of paper.

But should this not work and he finds himself in this situation again, make sure that he reacts more quickly than he has this time because the longer you leave something like this, the more difficult it is to deal with.

And finally, no matter how frustrating the process is, you must make sure your client does not take the law into his own hands. I sympathise with his position but sending the boys round is simply going to land him in hot water and make it even more difficult to evict these tenants.

Lender Response
John Heron is group director of mortgages at Paragon Mortgages

We don’t have any details about what led to this dispute with the tenants but it seems to have gone on for longer than it should have done.

Good property management is all about attention to detail and maintaining close and cordial relations with the tenant. If the tenants are unhappy for any reason they are more likely to default on the rent. On the other hand, if they feel that the landlord is committed to providing them with decent, fully functional accommodation they are more likely to pay on time and look after the premises.

It is also essential for your client to have a robust tenant reference process which will ensure that properties are only let to bona fide tenants with good records, the ability to pay and the right attitude toward your property.

For whatever reason, this evidently did not happen in this case. Your client’s first priority must be to either persuade the tenants to pay the arrears and resume regular rent payments or to remove them through the statutory process. Assuming the property has been let on an assured shorthold basis, as should have been the case, the procedure is straightforward enough. You simply serve two weeks’ notice of intention to commence court action to recover the property unless the arrears are cleared. If this is not successful it may be necessary to commence proceedings in the County Court, which will obviously take a bit longer.

While these procedures are running their course, it is important for your client to maintain good communications with his lender to avoid further complications. Ideally, full interest payments should be maintained. Certainly if they are not and there is no exchange of information with the lender the landlord may find himself on the wrong end of a ‘receiver of rent’ action which may be difficult to reverse. If there is to be a shortfall in payments it is crucial that this is discussed with the lender and a manageable payment schedule agreed.

A lender that specialises in buy-to-let products will take a constructive approach in helping your client work through this difficult situation, hopefully with as little financial cost to him as is possible, given the circumstances.

At the risk of repeating the point, it is likely that all of this could have been avoided if the tenant had been properly vetted in the first place.

If the landlord is not properly equipped to do this by undertaking credit searches and collecting references he should consider using one of the many commercial services which will undertake the job for him, including those available through a local professional letting agent.

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