How Lettings Agents can minimise rent arrears and avoid Section 8 notices.

Guest blog by Richard Murray, CEO of Veco

According to the Association of Letting Agents (UKALA), the private rented sector (PRS) will endure a tough 2023 with rising rents and more tenants falling into arrears, across the UK.

A survey of 1,100 members in England, Scotland and Wales shows there are concerns over tenant arrears, with nearly 68% of agents predicting that rent arrears will increase in 2023 – and 8.5% of agents say that the level of arrears will more than double.

The problem areas for landlords will mostly be in Greater London and the South East of England. Agents are also predicting that arrears in the South West will be ‘significant’.

During Covid19, many agents introduced payment plans for the short-term, as evictions were out of the question.  While the industry has been hopeful that an improved eviction process would be introduced post the pandemic, many agents and landlords will be disappointed with the new Renters Reform Bill.

The Government labelled the proposals as the biggest shake up of the private rental sector in 30 years' marking a generational shift that will 'redress the balance between landlords and the 4.4million tenants living within it.'

A Private Renters' Ombudsman will be appointed to settle disputes between renters and landlords, and tenants will be able to seek repayment of rent if the standard of their homes is deemed unacceptable.

The 'no fault' Section 21 evictions that allow landlords to terminate tenancies without giving any reason will soon be outlawed.   This will leave landlords relying on Section 8 notices to evict tenants and means they will soon require a valid reason to evict any tenant. A valid reason would include if the tenant were in rent arrears, they have caused damage to the property or if they are causing a nuisance to neighbours. 

Tenants will be able to challenge section 8 notices to evict which can result in lengthy waits for landlords as they await a court hearing.

The proposals are primarily aimed at clamping down on landlords who provide unfit homes, which the Government estimates to make up roughly one fifth of the sector.

What is clear is that agents need to minimise the risk of requiring the use of a Section 8 notice by improving the way they manage rental arrears. We work with agents that have set up their software so that at one minute past midnight, arrears are logged for a text message the next morning, to notify tenants. 

All tenant communications can then be automated until either the arrears are settled, or preparation for court action begins.  It is also important to ensure the messaging has the right tone and is legally compliant eg ‘Is it the case that it’s a simple oversight that your rent is in arrears?’

Much of the process can be automated, so that the appropriate communication goes out at the right time, and can be logged as a secure note, which can’t be edited or deleted.

During the pandemic, we worked with our clients to build Payment Plan functionality. Through our discovery sessions with users, we realised that this process was being done in excel, or outside of the software.

If agents are communicating well with tenants, whilst maintaining the information and note taking for everything they need for an eviction down the line, they will be fully prepared for any potential legal action. If this whole process sits in a software platform, agents will have a complete record of everything related to a specific property and tenants