27 March, 2009
In recessionary times everyone finds that their money may not stretch as far as it previously did and tenants are no exception. Some may find it difficult to pay due to no fault of their own (e.g. redundancy or illness) and judges have been correct to look sympathetically towards their cases, but a number purposefully choose not to pay bills. In these situations, one of the payments that may be avoided is the weekly or monthly rent and for landlords of all sizes, this can be damaging to their own finances. How to recover such amounts through the legal process can become particularly important in these types of circumstances.
The case of Catalyst Communities Housing Association v Colemack (Brentford County Court, 7 November 2006, unreported) represents the problems that can be faced by landlords when they seek to recover properties from tenants who decide not to pay the rent. In June 2000, the court gave the tenant 13 years to pay the arrears of £3,337 at a rate of £5 per week. During the next six years, the tenant was able to get the warrant suspended on seven occasions, whilst her rent arrears continued to steadily increase. By the time of the seventh suspension, the arrears figure was £12,358 and she had been permitted 47 years to pay this amount to the association.
This state of affairs was clearly unsatisfactory for the landlord and an appeal to the circuit judge allowed them to evict the tenant from the property. However, the court's lenience in permitting the tenant to remain in occupation had rendered the association's rent recovery policy ineffective, had effectively given the tenant a six year interest free loan of £12,000 which due to the eviction became a grant, and had used up considerable levels of time and expense on the part of the landlord to deal with the situation. It would be undesirable for similar cases to arise again in the future.
In order to try and avoid the lengthy process of obtaining a possession order from the court, landlords should utilise the Protocol for Possession Claims Based on Rent Arrears which requires them to give tenants five chances to pay the outstanding amount before seeking an order. These opportunities are stated as being:
It is an additional requirement of the Protocol for the landlord to take reasonable steps to ensure that the tenant understands what is happening, secure payments from the tenant's benefits (if applicable) and work with the tenant to resolve any housing benefit difficulties.
Provided that a landlord has met all the obligations under the Protocol, they should be in a relatively strong position to secure a possession order, due to the number of previous occasions where the tenant has had chances to reduce the arrears amount.
To add to the complexity of the area, there is no definitive answer that can be given as to what constitutes a 'reasonable' period of time for a tenant to pay the arrears amount to a landlord. Clearly, situations such as Colemack are too generous in their length but factors such as the tenant's own personal circumstances should be taken into consideration.
Case law such as Taj v Ali (No.2) (2001) 33 HLR 27 has indicated that it should be unlikely for a period of greater than six years to be considered as reasonable, as the landlord would need the court's permission to enforce a possession order made six years previously.
For example, if a tenant is only able, or willing, to repay a figure of £5 per week (equating to £260 per year), then in light of this relatively small repayment a landlord should not let the arrears figure pass the £700 mark and claims in these situations would normally warrant an order being pursued. In short, a landlord may wish to consider legal action and the use of the Protocol when the arrears figure reaches a point where they feel that the tenant will not realistically be able to pay the amount to them.
Our experience in practice is, unfortunately, that social landlords still struggle to obtain orders in such circumstances.
For private landlords, a more suitable option may be to seek possession of the property in question by using Ground 8 of Schedule 2 to the Housing Act 1988. This provision allows landlords to bring legal proceedings when the tenant falls into arrears at set points, depending upon the frequency at which payments were due to be lawfully made:
If the relevant amount of rent was in arrears both when the notice of forthcoming legal proceedings was served and at the date of the court hearing, the court must order possession unless there are exceptional circumstances.
Engaging with the Protocol by both landlords and tenants can provide mutual benefits. For the former, it enables them to show to a court in any possession proceedings that a tenant has been given numerous opportunities to begin paying the arrears without doing so. This would strengthen their case and help to demonstrate that they had acted in a reasonable manner. For the latter, the Protocol gives them five chances to interact with the process of paying their arrears in the knowledge that doing so can avoid eviction. In particularly difficult cases, it is advisable to seek legal advice.
The issue of how long a tenant should be given to begin paying the accrued debt has not been definitively resolved, but case law has offered some guidance on reasonable periods of time. Consideration should also be given to the personal circumstances of the tenant in making such assessments.