How To Deal With Rent Arrears As A Property Investor

As a landlord and property investor, it can be difficult when tenants are late paying their rent. Being a landlord is a business like any other, and you need to be paid for providing a well-maintained, legally compliant property. You want to maintain a good relationship with your tenants, but you also need to safeguard your investment and keep cash flowing to cover your financial commitments. Here’s our guide on managing late rent payments effectively and how you can reduce the risk of your tenants going into rent arrears in the first place.

Table of Contents

What Does Rent Arrears Mean?
What To Do if Your Tenant is in Rent Arrears
Strategies to Avoid Rent Arrears

What Does Rent Arrears Mean?

Rent arrears mean that your tenants have not paid the rent in full by the agreed date as specified in your rental agreement. Whether they are a day late with rent, or have paid almost but not quite the full amount agreed upon, they are still in rent arrears.

What To Do if Your Tenant is in Rent Arrears

There are several reasons why your tenants may be behind with the rent, and it could simply be an innocent mistake or misunderstanding, so don’t think the worst right away. Here are some steps you can take if your tenants go into rent arrears.

Get In Touch

The first thing to do is communicate with your tenants. They could have forgotten to pay their rent, be confused about the date that the rent is due, or have the wrong bank details. Getting in touch via phone is the first step to handling rent arrears, as you can usually resolve it quickly.

Work With Your Tenants

If your tenant says they are in financial difficulties and will struggle to make the rent payment, then there are several options available depending on the situation. If the situation is temporary, e.g. they are waiting on backpay from work, you could allow a little leniency in such a case if they have previously been a good tenant with no prior rent arrears. This is up to you, but many landlords would grant a small extension on a single rent payment as a one-off favour to maintain a good tenant-landlord relationship.

If your tenant’s financial issues are more long-term, e.g. they have lost their job, had their hours cut significantly or become injured and unable to work, they can apply for benefits. Some benefits can take some time to process, so you could be waiting a few weeks longer if your tenant needs to apply for benefits. The website Entitled To can help your tenant discover what benefits they can claim. If your tenant is in debt, they can apply for the Debt Respite Scheme, aka Breathing Space, which gives them up to 60 days during which their landlord cannot enforce rent arrears or start the eviction process.

FAQ: Can I evict my tenants if they start claiming benefits?

No – if a tenant’s circumstances change and they start claiming benefits, this is not valid grounds to evict them. You can evict tenants who are in serious rent arrears using a Section 8 notice, although if they are in the process of applying for benefits and are awaiting payments, you could be on very shaky legal grounds for an eviction. Attempting to evict someone just because they are now on benefits could be considered discriminatory,

especially if the tenant is part of a protected group under the Equality Act 2010.

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Set Up a Payment Plan

If your tenant falls behind with their rent payments, you can work together to create a payment plan to clear the rent arrears. If they aren’t in serious debt and still have money coming in, this could be the best option for you both. It requires good communication on both parts to work, so it may not be suitable in all situations. The details of the payment plan will vary depending on the amount of rent owed, the tenant’s income and other factors. For example, if a tenant missed a rent payment of £500 but could pay £250 now, you could add an extra £50 to the following 5 rent payments to clear the rent arrears over time.

Taking Legal Action

If your tenant has not responded to your attempts at communicating and has still not made the rent payment, it could be time to escalate things. If the rent is one week late, send a formal reminder letter to them. If your tenancy agreement contains an entitlement for you to charge interest on rent arrears, you can mention this in the letter. The letter should clearly state the overdue rent amount and a reminder to pay this by x date (14 days after the rent is due).

FAQ: Can I charge interest on rent arrears?

Yes, as per the Tenant Fees Act 2019, you can start charging interest on rental arrears after 14 days, as long as the tenancy agreement says so. The maximum amount of interest that landlords can charge on rent arrears is 3% above the Bank Rate for each day that the rent is overdue. At the time of writing (May 2025), the Bank Rate is 4.25%, so the maximum interest is 7.25%.

If 14 days have passed since the rent was due, you can now write to your tenant again stating that you will now be applying interest to their rent arrears (if allowed by the rental agreement), if you want to charge interest, that is. You can advise them in this letter that if you don’t hear anything back from them or receive the overdue rent within 7 days, you will take legal action. If you still don’t hear anything, you can then send a ‘letter before claim’. This letter is a final warning before you start the legal process of debt collection and/or eviction. You can start the process of obtaining an order for possession under Section 8 if the tenant is in at least 2 months of rent arrears if rent is paid monthly, or at least 3 months of rent arrears if rent is paid quarterly or yearly. If a Section 8 eviction is successful, you can simultaneously get a money judgment for the rent arrears from small claims court. Unless you used the accelerated procedure, in which case you will need to apply separately for a court order to reclaim the rent arrears.

How to Avoid Rent Arrears

To avoid the issue of rent arrears arising in the first place, be more selective when choosing tenants. You can ask for proof of income, do credit checks and affordability checks, ask for references, and if you aren’t satisfied with this, you could ask the tenant to provide a guarantor who agrees to pay the rent if they fall into arrears. You can also ask for rent to be paid via standing order, so it automatically gets paid into your account, avoiding the possibility of the tenant forgetting to manually pay rent in.

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