It can understandably be difficult for a landlord to accept a reduced settlement for rent arrears, particularly if they have felt financial pressure themselves and there is no justification or reason for the missed rental payments. However, it is important to examine the costs and delays involved in pursuing possession proceedings through the courts and consider whether possession can be recovered quicker and cheaper by entering into an agreement with the tenant.
Our legal partners Woodstock are currently working with a client who is owed over £20,000 in rent arrears. The tenant responded to the possession notice and their correspondence; this gave Woodstock the opportunity to settle this matter out of court by proposing the following.
- The tenant vacates the property by a specified date.
- After the tenant has vacated the property – the landlord will write off 10% of the rent arrears and agree a payment plan for the remaining sum.
If the tenant accepts the above offer, a carefully drafted settlement agreement will be prepared, which will protect the landlord’s position should the tenant fail to vacate or pay the amount owed as agreed. The landlord will then recover possession of the property and avoid legal costs in commencing court proceedings and the tenant gets a reduction in the total rent arrears.
Since the legal costs would likely be above the 10% write-off, considering these are not always recoverable, and possession will be recovered sooner and relet to a new tenant, this is arguably a much more commercially viable option for a landlord.
However, if the tenant does not accept the offer, possession proceedings will be continued including an order to cover the landlord’s costs. If the court awards possession, rent arrears and is considering whether to award costs at the hearing, evidence of the rejected offers will be made available to the judge. Although the court has discretion as to whether they award costs – the offer letters may persuade the court to award costs outside of the fixed rate on the basis that further action was only necessary due to the tenant’s refusal to accept the offer.
Clearly, this working example demonstrates the clear benefits in trying to settle possession claims whether the offer is accepted by the tenant or not. What is key is the careful drafting of the terms of settlement to ensure landlords are properly protected should the tenant fail to comply.
If you require any assistance in recovering possession of the property and/or you would like to enter a settlement with the tenant, please contact Woodstock Legal Services.