Today’s financial climate makes managing your finances effectively even more important than ever. With the cost of living increasing across the board, some people have found it increasingly difficult to keep up with their bills.
For renters, going into rent arrears can be a real concern. If this happens, it’s important to know what this means for your financial situation. Find out what happens if you have rent arrears and whether or not they can be written off in this guide.
What is rent arrears?
Rent arrears is the term given to the amount of money a tenant owes a landlord when rent payments are missed. The money owed that has accrued over time is known as ‘rent arrears’ and is classed as a priority debt that needs to be handled immediately.
For example, if a tenant’s rent payments are £800 per calendar month and they have missed three months worth of payments, their rent arrears would be £2,400.
Priority debts can cause significant problems if left to accumulate – these higher stake debts should always be dealt with before lower priority debts. Debts such as rent arrears, mortgage arrears, council tax arrears and bills, such as electricity and gas, can cause significant disruption if left unpaid so are classed as high priority debts.
Finding yourself in rent arrears can be very distressing, especially if you aren’t sure what can happen in this situation and how you can find help. Let’s discuss what happens if you have rent arrears and how to deal with the situation.
What happens if you have rent arrears?
As rent arrears are considered to be a high priority debt, the consequences can be serious. When signing the contract for your rental agreement, you signed an agreement to pay the specified rent fee at specified times. Defaulting on these rent payments can be considered to be a breach of contract.
We’ve rounded up some of the things that can happen as a result of failing to pay your rent and going into rent arrears.
1. Eviction and legal action
Rent arrears eviction is a very real potential consequence of failing to pay your rent. Landlords can try to ‘seek possession’ of the rental property if the tenant is in rent arrears. In order to evict a tenant for rent arrears, a landlord has to follow a set procedure.
This procedure to evict for rent arrears involves sending the tenant a written notice. After this notice period ends, the landlord can typically apply for a court order – usually known as a possession order – to evict a tenant. This possession order will have a date in which the tenant is expected to leave the property. If this does not happen, then the landlord can take further action.
At this point, a landlord will likely apply for a warrant of eviction, wherein a bailiff can evict the tenants from the property. It is absolutely essential to seek both legal and financial advice if you find yourself in rent arrears.
2. Late fees and interest
Some landlords may choose to add additional late fees and interest onto the amount owed in the rent arrears. However, this can only be charged if it states so in the tenancy agreement.
Dealing with rent arrears: FAQs
It’s important to deal with rent arrears as soon as possible, due to the very real prospect of eviction. Here, we’ll answer some of our most frequently asked questions about rent arrears and how to deal with them.
Can I get help with rent arrears?
Yes, it is possible to get help when trying to pay off rent arrears. If you don’t currently receive benefits, you should find out if you are eligible for any benefits that could help to top up your current income. If you already get benefits, you should still check to see if you are entitled to receive a greater amount.
To do this, use a trusted and government-approved benefits calculator to find out if you could be receiving benefits, or a greater amount.
Can rent arrears be written off?
While technically it may be possible for rent arrears to be written off, it does not happen often. Rent arrears represent a debt that a tenant owes a landlord, so generally are not written off.
However, some landlords may be willing to negotiate the debt owed and the time in which it should be repaid. By setting a repayment plan with a landlord, tenants can work to repay their rent arrears in more manageable segments.
Rent arrears can sometimes be included on a bankruptcy order and as such can sometimes be discharged, meaning the tenant would not have to pay them. However, even if the debt has been discharged, a landlord could still move to evict the tenant from the property.
Do rent arrears affect credit rating?
Yes, rent arrears can impact your credit rating. The extent to which rent arrears affect a credit rating depends on a number of factors, including:
- How long the debt has been outstanding.
- How much the debt is.
- Whether the landlord has reported the arrears to a credit reporting provider or the courts.
Landlords can request to take out a County Court Judgement (CCJ) when they request a possession order. If a landlord does take out a CCJ on a tenant, then the tenant’s credit rating will be impacted as it will show on the tenant’s credit report.
When lenders assess a person’s eligibility to take out a loan, they check the applicant’s credit report. If a CCJ for arrears is listed, this will likely make it more difficult to be approved for any kind of loan in the future.
While estate agents are best placed to help with renting a property, when it comes to rent arrears, other professionals need to be involved. Tenants who find themselves in rent arrears should always consult both financial and legal advice as the implications of the high priority debt can be huge – including eviction and court orders.