Prevention and management of rent arrears
Timely rental collection is key to maintaining a healthy revenue stream. Ultimately, this is what makes a functioning property business where bills are paid on time and balanced in accounting books. However, rent arrears have increased nationally in the last few years, presenting concerns for landlords and the government around reliance on legal action.
This calls for more information on proactive, preventative rent arrears measures so property owners can avoid possession routes and only utilise them as a last resort to support worst-case scenarios.
Here’s how you prevent and manage rent arrears according to best practice.
- Having an effective strategy
- Creating clear policies
- Monitoring rent accounts using IT
Having an effective strategy
First and foremost, property managers need to have a strategy in place. Although we hope tenants will never fall into arrears, we always need to be prepared for this eventuality with clear processes in place to deal with it if and when the time comes.
Be transparent to teams and tenants about your plans
Whether it’s a two, three or even four-point process, it doesn’t matter so long as you’re transparent about it to those it affects — your team and your tenants.
Act but also educate
When actioning rent arrears strategies, remember to be prescriptive and explain the action you’re taking as well as the follow-up action that will result if the instructions are ignored. There’s a reason why government departments like the HM Revenue & Customs operate in this way, as it proves to be the most efficient in encouraging action. How? By:
- Empowering individuals with all the information
- Arming them with choices and informing them of the outcomes
This way, you’re supporting the tenant to make the best choice for them, based on their situation.
Using a structured approach to communication also means you can manage rent arrears on a mass scale, moving individual accounts down a funnel to indicate which stage they’re in. For example, some tenants might balance their account after one notice, while others might still sit in arrears up until legal action is taken.
Incentivise if you need to
Some even suggest incentivising timely rental payments with rewards, providing motivation for tenants to pay on time, all the time.
This might not be as obvious as saying ‘pay on time and we’ll give you X’, but property managers may encourage tenants to comply by adopting some aspects of a loyalty scheme.