A few years ago, a friend of mine moved into a new home with his partner. He retained his old house in a city about 160 miles away, which he then rented out. All was fine for a couple of years until, one month, the rent didn’t land in his bank account. He gave the tenant a few weeks to pay, but then the next month’s rent became due. That wasn’t paid either. Despite my friend’s best efforts, he’d ended up with one of the nightmare tenants he’d tried to avoid.
The saga continued for many months. My friend eventually had to start eviction proceedings. During this time, the tenant stayed in the property and still failed to pay rent. By the time the tenant was evicted, he’d lost out on at least eight month’s rental income. He’d also spent a lot of time, money, travel and legal costs to sort out the problem.
Are nightmare tenants becoming more common?
Given the current cost-of-living crisis and rising rental costs, there’s no doubt that more and more people are struggling to pay their rent. According to this article in This is Money, landlord possession claims soared by 160% between April and June 2022. And while it may be a bit unfair to brand someone a ‘nightmare tenant’ for falling on hard times, there’s no denying that non-payment of rent causes nightmares for landlords. Many landlords have very small property portfolios and rely on them for their own income or retirements.
According to figures released by the Office for National Statistics on 25th October 2022, 39% of tenants were finding it difficult to afford their rent payments. So, if you’re a landlord it’s more important than ever to protect your income. To help you, we look at some of the most common ways to avoid nightmare tenants – and how to soften the financial impact when things go wrong.
Use a good tenant application form
If you are looking for someone to rent your property, it’s a good idea to ask potential tenants to fill in a tenant application form. You can find examples of these online. For instance, if you are a member of the National Residential Landlords Association (NRLA), you can download a tenancy application form here.
The advantage of using a tenant application form is that it can help you quickly weed out unsuitable applicants. For example, the forms can tell you whether an applicant earns enough income to cover the rent, whether they have a rent guarantor, plus details of former tenancies and evictions. Many landlords prefer applicants to have a gross income of at least two-and-a-half times the rent, so an application form can give you early warning about whether a prospective tenant will struggle to pay.
Another bonus of using a tenant application form to whittle down applicants is that you don’t have to waste time arranging viewings for every single person.
Use a professional tenant referencing service
Once you have shortlisted a potential tenant, we strongly recommend you use a professional tenant referencing service. There are many different providers online, so compare the market before you choose one.
A comprehensive tenant referencing check will look for evidence of failure to pay rent in the past, confirm income and obtain references from current landlords or letting agents. They’ll also include a credit check, including searches for County Court Judgements, bankruptcies and insolvencies. Some services will also provide you with an affordability calculation.
Tenant referencing services usually cost very little and can help highlight issues with potential tenants before you offer them a tenancy.
Get rent guarantee insurance
If you think back to my friend’s nightmare tenant, it’s worth remembering that they were actually a model tenant for several years. As the cost-of-living crisis continues, increasing numbers of previously exemplary tenants will fall into rent arrears. If this happens to one of your tenants, it can lead to lost income, eviction hassles and legal expenses.
The smart way to protect yourself against this eventuality is to take out rent guarantee insurance. You can often combine this with your landlord buildings insurance. You can choose policies that will cover your rental income if a tenant stops paying, plus legal expenses for the eviction process. Some policies will also pay a proportion of the rental amount for a short period (such as three months) after any eviction. For maximum peace of mind, you may also want to add cover for any malicious damage tenants cause to your property.
Improve your portfolio management
Lastly, if you haven’t already switched to landlord cloud accounting software, it’s a good idea to do so now. This kind of software makes managing a buy-to-let portfolio simpler and makes it easy to spot when rent hasn’t been paid. If you would like to learn more, check out our Landlords Platinum Accounting Service with free MTD-compliant landlord software.
About Ben Locker
Ben Locker is a copywriter who specialises in business-to-business marketing, writing about everything from software and accountancy to construction and power tools. He co-founded the Professional Copywriters’ Network, the UK’s association for commercial writers, and is named in Direct Marketing Association research as ‘one of the copywriters who copywriters rate’.