One of the major off-putting factors of owning residential investment property is the risk of having nightmare tenants. Yet, the process of dealing with the issue is often over-complicated and can be relatively simple if managed in the correct manner. The work of Landlord Action has been well publicised not only in property investment circles but also in the national media (including the Telegraph, the BBC, the Mail, the Times and the FT). We had a chat with Paul Shamplina, Director of the organisation, on their history; the effects of the credit crisis; essential steps to be taken; tenants rights; public organisations, such as the Citizens Advice Bureau; debt recovery and more…
1) You and your service need very little introduction to the majority of our readers – but for those who have not heard about ‘Landlord Action’ can you outline a bit about yourself and how the organisation came to be? Paul Shamplina, co-founder of Landlord Action. Landlord Action was set up in 1999, founded on the principle of providing a fixed-fee service to landlords and letting agents who have problem tenants. This was in response to solicitors, who were unable to give fixed fee rates or any indication of how long it would take to evict a tenant. Ten years later, Landlord Action have acted on nearly 17,000 instructions and become the market leader in dealing with problem tenants. We now have a free legal advice telephone line where landlords and letting agents can find out what their rights are when dealing with bad tenants.
2) Have you had to change your model as a result of the credit crisis? Have tenant problems increased, decreased or roughly stayed the same? Not really. The beauty about our model is that it provides a convenient and cost effective service to all landlords and letting agents. Of course, our services have grown in popularity over the years and, particularly, last year was quite busy due to the recession and unemployment situation in the UK. Therefore, we did see more demand for our debt recovery services, as you’d expect.
However, our services are designed to meet the needs of landlords who are having problems with their tenants. It just so happened that more landlords have been experiencing difficulties as of late and as a result, the need for our services has grown. As an indication, we have successfully acted on over 16,000 evictions to date, averaging roughly 1,600 new instructions per year over our ten year history. 2009 was a different story and we had taken over 2,500 new instructions. 2010 shows little signs of slowing down and it is very likely that we will exceed 2,500 new instructions this year.
3) What are the necessary steps to be taken prior to the signing of any kind of tenancy agreement? Without a doubt, our primary advice to landlords and letting agents is to be thorough with regards to due diligence. Many difficulties that landlords face could have been avoided if landlords and their agents were more thorough when it came to tenant referencing. There is no substitute for methodical referencing and being on top of credit control. Many novice landlords will wait for months before chasing up a tenant properly and serving notices. During this time, they are continuing to lose rent. So, the key is to act quickly.
A few months ago we were contacted by a landlord to serve notices where the tenant was in eleven months rent arrears. What chance does the landlord have of recovery all of this money now? If you find out mid tenancy that the tenant has lost their job or has fallen in financial hardship, make sure that you act promptly with regard to them applying for local housing allowance. Take them to the housing benefit office to make an application – this will demonstrate that you are a responsible landlord, as well as keeping any arrears to a minimum.
On the 5th August, I will be featuring on ITV’s Tonight Programme talking about bad tenants. The programme will also feature our biggest rent arrears case that we have been instructed on (in case you are wondering, it was for nearly £90,000!!). The programme will be an eye opener for many landlords.
4) Can you run through some of the essential steps that need to be taken if a tenant is in arrears? Acting quickly is the most important thing a landlord can do. As soon as the tenant is in two months rent arrears, Landlord Action can begin issuing proceedings. Useful tip: with an AST (Assured Shorthold Tenancy agreement), two month’s rent arrears is one month and one day after the first rent payment was missed (because rent is technically paid in advance). Landlords and management agents should also be tight with regards to credit control. On the day that the rent is due, they should check their bank accounts online to see if the funds have been credited. If not, they need to be in touch with the tenant to find out why it hasn’t been paid.
Another key step for landlords is to calculate what the worst-possible case scenario is with regards to cost. Although only in a small percentage of cases, eviction proceedings can take up to five months with the most obstinate type of tenants. What exactly would this cost a landlord? Five months mortgage payments, the cost of eviction proceedings, any bills that the landlord pays (or, in some cases, council tax etc). This amount of money should always be kept in a reserve account should the landlord ever require.
We have seen many cases where landlords are facing possession of their properties by lenders due to the fact that their tenants are in arrears and not paying the rent. These landlords are a cautionary tale for other landlords.
5) Is it always suggested to try and sit down with the tenant if there is a problem? Absolutely. Always, always maintain good communication with your tenants. Prior to serving any legal notices it is always worth speaking to the tenant first and giving them a chance to explain or resolve the matter. If there ever is a problem, the landlord can then do the responsible thing of finding out how to help the tenant. For example, if they have lost their job, you can help them apply for housing benefit.
6) What are the most important factors for a landlord/lady to remember with regards to a tenants rights (even though they are being evicted)? It is important to note that a tenant does have rights when they are being evicted and a landlord must respect these rights. In the same way, a landlord also has rights too. This is why Landlord Action set up a free legal advice telephone line to help landlords, letting and management agents understand what they can do and what they can’t. The best thing for a landlord to do if they are unsure about their rights is to get in contact with us: 0845 881 0011
7) Many landlords would state that organisations the such as ‘Citizens Advice Bureau’, generally speaking, have a very negative view on them – but are there any ways that landlords in the predicament of having a problem tenant can utilise their services? There is a perception from some areas within the property industry that feels that the law is biased in favour of the tenant. Many people blame companies such as Citizens Advice Bureau and charities such as Shelter for this. Landlords can use Citizens Advice Bureau if they want to. However, landlords need to keep in mind that this is general advice only. In the past, the Citizens Advice Bureau have referred landlords to our advice line since our service is more tailored around landlords and we speak their language.
8)And what about arrears recovery – is it really worth the hassle? It depends. In a perfect world, landlords will have completed thorough due diligence on the tenant prior to the start of the tenancy. Using a reputable tenant referencing company to obtain a report on your tenant is a must. It is also important to gather key documents prior to the tenancy. For example, a copy of the tenant’s Drivers License or Passport, three month’s bank statements, a National Insurance number etc – these make it easier to trace the tenant if they abscond.
Landlords should also be encouraged to take out adequate insurance that covers malicious damage and, perhaps, another policy that offers a rent guarantee. This will ensure that, if your tenant does abscond and leave the property in a poor condition, your costs will usually be covered so you are not losing any more money.
Landlord Action also offers a fixed-fee tracing solution for landlords. Unlike other tracing products, we use ex-policeman and bailiffs who are experienced in finding people who have gone off the radar. Once we have traced your tenant, we always encourage the landlord to evaluate the cost of recovery in relation to the size of the debt outstanding – we do not want to be throwing good money chasing bad if there is a poor chance of recovery.
What is a poor chance of recovery? If we come to learn that the tenant has a string of bad debts, is on housing benefit and, generally, do not have any assets to service the debt, we advise you to drop the matter. However, if your tenant does have assets, our Debt Recovery department can put together a strategy to reclaim the outstanding debt.
9) Landlords were pleased to hear that the ‘registration scheme’ that was considered being brought into place has now been scrapped – whilst your organisation does a lot to help landlords, do you think that more measures should be in place to protect tenants who are victims to the unscrupulous ones? This can be quite difficult since there must be some sort of control and regulation to avoid abuse. Before we know it, there could be tenants and/or landlords suing each other for defamation. Of course, there are some rogue landlords who operate and they give the rest of us a bad name. These landlords should be named and shamed. Similarly, Landlord Action flags up serial bad tenants to landlords and letting agents who are registered on our database. If we have evicted a tenant on more than one occasion and have a possession orders to that effect, we will send an email out to local landlords and letting agents on our database warning them.
Many readers will be wondering what a serial bad tenant is. Well, a serial bad tenant is one who goes from property to property without any intention of paying the rent. Most of these individuals are in fact, intelligent people who know Landlord and Tenant Law very well. We have flagged up approximately 25 of these sorts of tenants.