An important part of being a property investor is dealing with defaulting tenants, that is covered in the online property investment course #LegacyOnlineCourse
The number of tenants who are defaulting on rental obligations are on the rise, which necessitates buy-to-let owners to act quickly against non-payers, says Michelle Dickens, MD of credit bureau Tenant Profile Network (TPN).
However, Dickens says landlords should avoid illegal action such as locking the tenant out or disconnecting services. These are criminal offences and can get property owners into more trouble than they bargained for.
Dickens says there are other steps that landlords are entitled to take to deal with defaulting tenants without having to employ legal assistance. The latter can be both costly and time consuming and may not be necessary if landlords take the following action as soon as non-payment occurs:
Step 1: Call the tenant immediately and ask for payment. If the tenant has a sad tale, ask for a payment date that you are agreeable to. Do not over indulge the tenant with a payment date too far in the future.
Step 2: If payment does not reflect in your account on the agreed date, the landlord must immediately send the tenant a written breach letter giving seven days’ notice to remedy payment (the period usually stipulated in standard lease agreements). The breach letter should also note the landlord’s intention to report the payment default to the credit bureaus should the account not be settled within the seven day notice period.
Dickens says landlords are entitled to load a default record against the tenant 20 business days after a letter of demand for payment has been sent. The letter must specifically note the landlord’s intention to load a default at the credit bureaus. Dickens says the last step is an important one as tenants are generally more likely to pay up if they realise that defaulting on rentals can affect their credit profiles.
Step 3: If the tenant fails to make payment within seven days after the breach letter was sent, the landlord should send a written notice to cancel the lease agreement and demand that the tenant vacate the property. The date given to vacate will depend on the stipulations of the lease agreement. Most lease agreements stipulate that tenants must vacate the property immediately once the seven-day notice period has lapsed.
If the tenant fails to vacate the property or disputes the cancellation of the lease agreement, the landlord will at this point have no alternative but to employ legal assistance to proceed with an eviction order. However, the eviction process can be a lengthy one, often taking three or four months to effect.