What to do if your tenant lost their job?

What to do if your tenant becomes unemployed

If a tenant has lost their job and is having difficulty paying their rent some landlords may feel that the only option is to end the tenancy and to find a new tenant. However, it can make good business sense to try and find a way to sustain the tenancy. This avoids the risk of a prolonged void period and incurring extra costs such as advertising and tenant referencing. You may also lose a tenant with whom you have built a good relationship.

There are a number of options to consider if your tenant becomes unemployed and has difficulty paying the rent:

Keep your eye on the ball

Check that the rent is paid on time and maintain good communication with your tenant (or agent if you are using one). That way you will be more likely to find out about a potential problem before significant arrears occur.

Being able to spot a problem early also gives you and your tenant a chance to discuss any issues and time to decide what action to take. Options include giving your tenant more time to pay the rent, reducing the rent for a limited period, deferring part of the rent until they have got a new job or even agreeing to end the tenancy early at a mutually convenient date. It is good practice to ensure that whatever is agreed is confirmed in writing.

For tenants experiencing unexpected hardship (including losing their job) – 13-Week Protection Rule

Tenants who have experienced unexpected hardship such as losing their job may be eligible to claim Local Housing Allowance to cover the full amount of rent due. This is known as the Local Housing Allowance 13-Week Protection Rule. Payments at the full rate can only be made for a maximum of 13 weeks.

The 13-Week Protection Rule is designed to help tenants who would normally have been able to pay their rent. The support ensures that a tenant can meet their rental obligations while giving them time to find another job or look for somewhere cheaper to live.

Tenants wishing to claim Local Housing Allowance under the 13-week Protection Rule should apply to their Local Authority. The 13-Week Protection Rule is not widely publicised and you may need to advise your tenant to specifically ask for it when they speak to their Local Authority. A claimant must demonstrate that they were able to pay the full rent when their tenancy began and show that they were not entitled to benefit in the 52 week period before their claim.

The Government produces a ‘Housing Benefit Local Housing Allowance Guidance Manual’ for Local Authorities to use. Details about the 13-Week Protection Rule can be found in Section 7.10 – 7.14. A copy of this manual can be found in the NLA Landlord Library within the Local Housing Allowance subject area, under Additional Resources.

For tenants on low income – Local Housing Allowance

Tenants with a low income and limited capital or savings may be eligible to apply to their Local Authority for Local Housing Allowance payments.

The Local Authority Housing Benefit Department or Housing Advice Team can give guidance to your tenant on whether they are eligible and how to claim.

Claimants are required to provide various documents including: proof of rent (tenancy agreement), National Insurance Number, identification, and details of any income, capital and savings. The Local Authority may also want to see the income details of other tenants living with the claimant, if they are living in a shared house.

If your tenant is in arrears you can apply for the benefit to be paid directly to you. The Local Authority is required to make payments direct to the landlord, if you can show that your tenant is at least eight weeks in arrears. If the arrears are less than eight weeks then the decision is at the discretion of the Local Authority, taking into account the evidence provided by the landlord and the individual circumstances of the tenant.

Details of benefit levels paid in your area can be found on this website: https://lha-direct.voa.gov.uk

More detailed information about Local Housing Allowance can be found on the NLA Landlord Library.

Hardship and discretionary grants and loans.

The availability of grants and loans varies around the country and in some cases may not exist at all. Some grants and loans may be offered by Local Authorities, (often through Discretionary Housing Benefit payments) others through local charities or trusts.

Your tenant may also be eligible to receive State Benefits such as Council Tax Benefit, Jobseekers Allowance and Local Housing Allowance to help them meet their bills.

To find out whether support is available in your area try contacting the Housing Advice Team in your Local Authority, Jobcentre Plus and your local Citizens Advice Bureau.

Your tenant many also be able to apply for support from their university, Students’ Union or college, if they are in some form of higher education.

Financial support from friends and family

Another option is to ask your tenant to seek support from friends or family, for example as a Guarantor. A Guarantor is someone who agrees to pay the rent and underwrite other financial obligations as required by the tenancy agreement. A sample letter of guarantee and guidance are available from the NLA website.

Practical support
 
Organisations such as the Citizen's Advice Bureau and Local Authority Housing Advice Centres can provide tenants with financial advice and help with budgeting should they need it.

Keep good records

It is advisable to keep good records throughout the tenancy, including details of rent payments, copies of correspondence and records of contact with the tenant. Confirm any verbal agreements in writing.

Your records should also include copies of SMS messages (texts) where relevant. Some phone companies will allow you to download copies of SMS messages or you may be able to forward a SMS to yourself as an email. You can also save a copy on your phone and make a written note of the message, including date and time.

Protect yourself from a harassment claim

If your tenant is not paying the rent it is understandably an anxious time for landlords as well. Be careful not to behave in a way that could be construed as harassment, however well intentioned. This could include persistent phone calls to your tenant, visiting their place of work or repeated visits to their home.

Where you have reason to contact your tenant more often than you would normally, make sure you keep a diary and record: date, time, method of contact (phone, SMS, email, letter, etc), reason for contact, and whether you had initiated the contact or your tenant had asked you to contact them.

If it is necessary to visit the property you must give at least 24 hours notice in writing. If the tenant has invited you to visit, make a note in your diary and acknowledge their invite in writing if possible.

Rainy day fund

Life as a landlord is rarely straight forward and any number of expensive emergencies can crop up without warning. Putting a bit of money aside each month will help take the sting out of the cost of urgent repairs, non-payment of rent or void periods when the property is empty.