Preventing Rent Arrears
How thorough referencing, clear payment processes and early communication reduce the risk of arrears.
The best way to deal with rent arrears is to prevent them. Thorough referencing, clear payment processes and a professional relationship with your tenant significantly reduce the risk of arrears arising.
Referencing
A thorough reference — credit check, employment reference, previous landlord reference, affordability assessment — is your first line of defence against arrears. Do not accept borderline references without a guarantor. The cost of a bad tenant far exceeds the cost of a referencing agency.
The rent should not exceed 35–40% of the tenant's gross monthly income. For a rent of £1,200/month, the tenant should earn at least £30,000–£34,000/year.
Clear payment process
Set up a standing order for rent payments. Confirm the payment date, amount and bank details in writing at the start of the tenancy. A standing order reduces the risk of late payment and creates a clear record.
Guarantors
For tenants with limited credit history, low income or borderline references, require a guarantor. The guarantor agreement should be signed as a deed. Reference the guarantor in the same way as the tenant.
Rent guarantee insurance
Consider rent guarantee insurance for every tenancy. It typically costs £100–£200 per year and covers up to 12 months' rent plus legal costs. It is particularly valuable for higher-risk tenants.