Legal Update

From Possession to debt recovery.

One of the most common reasons for eviction of a tenant is non-payment of rent. Whilst landlords may be relieved to achieve vacant possession, they may be unaware of the various methods in which unpaid rent can be recovered.

However, before debt recovery, there are three steps of possession which must be completed.

Step one – Serving notice:

If a tenant has more than two months of rent arrears, a Section 8 Notice can be served using mandatory ground 8 under Schedule 2 of the Housing Act 1988.

A Section 8 Notice must be served on the tenant using the method described in the tenancy agreement. This is usually by 1^st Class post. Notice must give at least 14 days for the tenant to settle the arrears and vacate the property.

Step two – Court proceedings:

When the notice expires, if the tenant has not vacated the property or cleared the arrears, then the landlord can issue court proceedings to apply for a possession order, and a money judgment for the rent arrears. It is important to note that if the arrears are brought below two months, then it could be more difficult to gain the possession order.

Step three – Eviction:

Once the order is made by the court, the tenant will be given a specific date to vacate the property and settle the money judgement. If the tenant stays beyond that date, the landlord can instruct bailiffs or high court enforcement officers to evict the tenant.

Debt recovery:

Once the tenant has been evicted, it is advisable to allow some time before pursuing the debt. This is because it allows the tenant to re-settle at a new address, which can then be used as the focal point to contact them.

In many cases, an address and employment trace is usually required to determine the new address, and to assess the tenant’s ability to pay the outstanding debt. The landlord can then consider the following options to recover the money owed:

• High Court Enforcement – High court enforcement (HCE) officers obtain writs of control, which allow them to attend the traced address and seize goods. HCE are also able to set up payment plans with the debtor to collect money each month.
• Attachment of Earnings (AOE) – AOEs are orders from the court that mean money can be deducted directly from the debtor’s salary each month. This is of course only viable if the debtor is in employment.
• Charging Orders – Charging orders secure the debt against property owned by the debtor. This means that if the property is sold, the amount is taken from the sale proceeds and released to the landlord. Where the tenancy is secured by a guarantor, this is often a route worth exploring.
• Third Party Debt Orders – If any third parties owe the debtor money, an order can be made by the court for the money to be paid directly to the landlord. However, this can be difficult without details of the debtor’s account information.
• Settlement – Sometimes the most effective method is communication with the debtor. It can be advisable to invite them to offer an amount to pay each month that will be sustainable for them and sufficient for the landlord.

As explained above, there are various methods to recover unpaid rent that can be explored once possession has been gained. However, there are always costs involved, therefore landlords who do not have appropriate Rent and Legal Protection in place are advised to consider whether the costs are proportionate compared to the amount of debt owed commencing debt recovery action.

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