"Rent Holiday" asked for by tenant

[teerev]

Good evening, I have recently found and joined this forum and this is my first post here, apologies in advance for the length of it.

One of our tenants has just asked for a "Rent Holiday" and I'm not quite sure how to proceed as this is a new one on me.

To fill in some details, this lady has rented one of our one bedroom flats for the last two and a half years or so at the rate of £575 per month, she is a pensioner and I understand that she is in receipt of some disabilty allowances as well.

Her rent is up to date at the moment and she has always been on time with it apart from a couple of hundred pounds once when her bank made a mistake but she caught that up over the following three months.

Unfortunately it looks like she has recently got into financial trouble to the tune of about 3-4K by foolish buying of stuff she did not need on credit cards, probably not that unusual for lonely old people. I understand that she has now cut up these cards but have no proof of that.

She has been to see the CAB and they have advised her that her best option is to go bankrupt to wipe out these debts but that will cost her £705.00, this is money she does not have so she has asked our letting agent to ask us to giver her a "Rent Holiday" for three months to enable her to do this and to get her finances in order.

She is suggesting that she would then be in a position to repay these arrears at the rate of £200.00 per month on top of her rent, by my reckoning this would take almost nine months.

We do try to be caring landlords and have given several of our tenants help and support when they have had problems but we are very concerned that this lady may not be able to keep to this plan and would just be digging a deeper hole for herself and leaving us open to financial loss.

We will obviously be discussing this with our letting agent but in the meantime, has anyone here been in this situation and if so can they offer me any advice, tell me what action they took and what the outcome was?

I would also be interested to hear of any suggestions for alternative actions that our tenant can take as we will openly discussing this situation with her.

[theartfullodger]

Trouble is by going bankrupt she would no longer owe you the money.....

Is she getting HB/LHA or pension credit & has she applied for DHP??

Difficult: I had a tenant go bankrupt ('twas complicated..) but to be fair she knew she then had nowhere to go & was scrupulous about paying rent on time & in full.

Dunno what to advise: But the only approach I would think about (I am not recommending this...) is saying you do not agree to any "rent holiday" but understand she will be late paying, will issue s21 & s8 (g8, 10 & 11 as appropriate) and if she does not stick to her proposed repayment plan will evict using s21/s8. It's a nasty old world.. You have the strong negotiating position as if evicted with rent arrears she very stuffed these days.... (? after going bankrupt would she still have rent arrears?? - but then the process takes a year or so,...)

Good luck & hope it works out...

[Wannadonnadoodah]

Is there a deposit held in an approved scheme? After 2 and a half years do you really need to have this money set aside for potential damages to the property? Could you use that.

[grouse]

Trouble is by going bankrupt she would no longer owe you the money.....

This is very true, the money she owes you will be written off, and she will be instructed that she must not repay it.........

This is from experience as I had an employee who went bankrupt. They had borrowed the money for the bankruptcy from a friend and were told not to repay it.

They are no longer friends............

[Hippogriff]

A 3 month rent holiday at a rate of £0 would be a big "no" for me. It's too much to ask.

Kudos to you for even contemplating the possibilities. What you want is no arrears at all or the smallest amount of arrears... if the rent is £575, would a compromise of £400 for 3 months allow her to get back on track? If nothing is paid then the warning siren can be sounded and action taken.

If that is kept to, then the amount to catch up would be much smaller, but you will know that you really helped (hopefully).

I'd remain very wary. I just would. What worries me most is that you appear, from what you wrote about the Agent being the main conduit for communication, to not have a relationship with the Tenant anyway, so it's not like you have to tell the Tenant "no" face-to-face and feel really bad about it.

[Claymore]

Wow, this is an unusual situation.

You have to admire the woman's intentions by asking, rather than the alternative to just going ahead with her plan.

It's a difficult one to call. Could you go and see this woman, have a chat with her and then go on your gut instincts? In all honesty, this is what I'd do - combined with Artful's suggestion in post 2.

[jta]

My reaction would be that rent has priority over CC debts. I would expect the rent to be paid, the CC companies are far more likely to accept an 'arrangement' as long as she is honest with them.

[Interlaken]

I agree with jta. Rent first. Issue a Section 21 now to make sure you don't get taken for a complete ride.

[elniinio]

I don't know what I would do in this situation. I think artful has the best advice as far as serving pre-emptive s21 Asap. I would add that it's worth thinking about possible outcomes if you say no. T could simply stop paying rent and it would take you more than 3 rent periods to evict her, plus you'd incur costs. Even if you used s8 and got a money order, if she is declared bankrupt that will be worth nothing. It's a tough one to call, good luck.

[teerev]

Thanks very much for the comments and advice so far, you can see why I'm not sure of the best way to deal with this can't you.

Just to answer some of the questions and add a little further information.
Yes, our letting agent has the deposit lodged in a secure scheme so I'm sure that would be returned to us in case of default.

We know and have good relationships with all of our tenants as our business office is in part of our main letting site where we have three shops and six flats, we also deal with any maintenance issues directly so they all talk to us on occasion.

We don't deal with tenants directly on financial matters as we found out to our cost long ago that it was best to keep that sort of thing done at arms length through an agent, we do of course work closely with our agent and ultimately we make the final decisions.

This lady spoke to me directly about her financial situation a week or so ago and it was obvious that bankruptcy was a far better option for her at her age than the alternative of debt management which could have taken her years to clear her debts and as a friend I gave her that advice, unfortunately for us whatever she does puts us in a difficult position.

Her rent due day is today and she put the "Rent Holiday" idea forward to us this morning, I asked her to go the the letting agent with it to keep them between us and her financially and to make sure that everything is logged by them in case it all goes bad.

They have already emailed me her proposals and I'm going to talk to them in the morning, my first thought was that three months was far too long, I was thinking along the lines of Hippogriff with a months rent and that along the artfuldodgers S21 idea may be the way forward, I'll update further after talking to our agent.

[emwithme]

Do not do it.

She would not have been told this by the CAB (in fact, all debt charities that I've experienced* are very "hot" on telling people to make sure their rent is paid up to date when they go bankrupt because they would run the risk of becoming intentionally homeless at the point where it would be very difficult to get alternative accommodation). She would have been told not to jeopardise her home!

Also - any debt that is extant at the time of the bankruptcy goes into the bankruptcy. She would not be allowed to pay you back any arrears because it would be seen as prioritising one creditor (you) over the others.

*I have had some serious debt issues for most of my adult life - stupid decisions when I was 18 affecting the next nearly 20 years - culminating in bankruptcy a few years ago. I must admit that my rent was ALWAYS paid on time and in full during this...

[mariner]

I agree, even Shelter say rent is a priority debt. If you want to help, assist by helping her to ensure she is claiming all available benefits/allowances and better debt management advice. £750 bankruptcy fee could pay a chunk of her outstanding CC debt and does a pensioner need a perfect credit rating, which would be more seriously affected by bankruptcy than CC debt. Giving her a 'rent holiay' to pay the fee may adversely rebound on you.

[andybenw]

Can't this lady get an 'IVA' where she could still pay the rent in full and have a reduced liability for her credit card debt. As others have said I would be advising this woman of shelters advice that rent is her priority debt. The trouble coukd be is if you refuse point blank with no reasoning etc she could decide to take her 'rent holiday' unilaterally, and she will certainly not be able to be removed within her 3 month time frame to become bankrupt.

[Lawcruncher]

jta is thinking along the right lines.

What the tenant seems to be looking for is to clear the credit card debts ASAP. If she is looking to do a deal she ought to be looking to do it with the credit card companies. If the OP is willing to help out I think that rather than allow rent to stop altogether it should be reduced so that he still has something coming in and so that the catch up will not get away from the tenant once she has cleared the credit card debt. At least the tenant is not putting her head in the sand as so many do who get into debt.

[Darth Wookie]

If it's less than 15k debt then she would be best advised to seek a Debt Relief Order. They are only about £95.
Harlow District Council v Hall [2006] EWCA Civ 156 gives some useful guidance on the treatment of rent as a debt, where an arrangement to pay may be an acceptable breach of an order if the lesser of two evils is retain the family home. The insolvency service have also made it quite clear that where a repayment plan is within the financial means of the tenant (i.e. within the £50 excess that a DRO allows), they would not dismiss the DRO or consider it a serious breach. They recognise that the cost of an eviction, rehousing, void loss etc is a lot more expensive to creditors and the state than Mrs Miggins paying up to £50pcm towards an arrear.
I wopuldn't give a rent holiday, however I'd accept it a little later if your own circumstances allow. No more than two months though.