Rent Collection Policy for Social Landlords in the UK

Introduction

Every responsible social landlord should have a rent collection policy as part of their overall strategy on housing and for their organisation and procedures.

Rent is a major source of revenue, sustaining services, providing investment opportunities, and is consequently a key business activity.

Therefore it is important to establish a clear and workable policy that is especially proactive and preventative to lessen the many difficulties faced in dealing with tenant arrears.

A rent collection policy is a documented system that sets out your stall to your tenants. It outlines the scope of your policy on rent with guidelines to follow and responsibilities to uphold on both sides.

A plan for collecting rent payments helps prevent the great difficulties of managing payments, dealing with arrears, and taking legal action

To itemise, the key focal points for your policy should be:

1. Maximising rental income
2. Promoting financial inclusion
3. Prevention of arrears
4. A supportive approach
5. Acting on your policy
6. Reviewing your policy and procedures

A rent collection policy for social landlords should not only set out the rules and guidelines but also the procedures that should, or indeed must, be followed.

As the Department of Communities in Northern Ireland has added:

“It should be supported by a culture where rent collection is given a high priority and where the appropriate resources, with relevant delegated authority to carry out their duties in pursuance of rent collection, are made available.”

Furthermore, important areas of your policy need to be shared with your tenants. Therefore it should be published on paper and in digital format to be made readily available across the community.

To begin with, a formal rent collection declaration should establish in a clear and succinct manner a statement of intent on your approach to rent and dealing with arrears.

This position should aim to fit within the wider goals and strategies of the council or housing association and any regulatory frameworks that exist. Nowadays, in particular, it should run alongside a ‘Value for Money’ strategy that emphasises efficiency in savings and maximising income.

However the policy should not be overlong and over-elaborate in detail but instead be easily understood in an accessible language for tenants.

It should be written in plain English, clearly explained, to avoid any misunderstanding or confusion and including both a commitment to support and an intention to sanction.

To ensure that the policy becomes an effective working document all employees should be trained to properly follow the rules and guidelines.

1. Maximising Rental income

A prime focus in a rent collection policy is to maximise income to ensure a healthy stream of finance to maintain and develop the housing service.

Tenants have a responsibility to pay their rent in full, on time, every time and they must consider rent to be a priority debt.

A significant percentage will be on benefits, particularly for council tenants. With the introduction of Universal Credit the housing element payment does not necessarily transfer directly to the landlord as was the case with Housing Benefit.

Consequently, more than ever the policy must be absolutely clear on insisting on a ‘rent first’ approach. It has to be impressed upon your tenants that they must pay their rent at the expense of any other competing financial demands.

There are three important areas in putting your policy into practice:

1. Recording
2. Managing
3. Collecting

i. Recording: - With modern automated IT systems it is now easier to raise alerts and track late payments from your tenants. With an organised system that is diligent in identifying arrears you can take immediate action to find out what has happened and what can be done.

ii. Management: - Early intervention should be clearly set out in your policy so that residents understand that the landlord will act swiftly to deal with arrears. Also include the sequence of the further actions that you will take such as warning letters, default letters, notice of proceedings, all the way to court action, and eviction.

Your policy should certainly give a sense of ‘firm but fair.’ As any responsible and conscientious social landlord would implement support and advice on debt as a priority to help tenants with arrears difficulties.

In fact preventative action should be to the fore of the minds of landlords. Actions such as individual income maximisation and assistance with welfare benefits can help deal with these problems early.

But at the end of the day tenants need to be aware that strong action will be taken if needed and that they have a legal responsibility to pay their rent.

iii. Collection: - The different methods of payment bring opportunities to improve the efficiency and reduce the cost of collection. Minimising arrears and reducing operating costs are vitally important in a modern cost-cutting environment.

For example, online payments and direct debits have much lower transaction costs than traditional hard cash methods and should be encouraged among your tenants.

Payment of rent in advance on sign-up plus late fees as penalties for missed payments can strengthen your collection policy and help income. However they can prove very unpopular and difficult both to introduce and enforce for social housing landlords.

2. Promoting Financial Inclusion

As part of an effective rent collection process it is incumbent upon landlords, and in their own interest, to promote financial inclusion. This is about encouraging social responsibility and personal independence but it also means tackling poverty and disadvantage. Housing associations and especially local authorities rent to a disproportionate amount of people on low incomes.

Your tenants need to have an understanding of household budgeting, taking responsibility for their finances, and managing their money, especially with the introduction of Universal Credit.

But it also means tenants being made aware of how to maximise their income through welfare benefits, income, advice, and debt management. This often requires housing departments to signpost their customers to more specialised agencies.

It can also mean tenants setting up a bank account, organising direct debits or conducting online transactions. This is convenient for them and also cost-effective for the landlord in reducing collection costs.

Financial inclusion is also a promise to allow instant access to information with online statements or balance enquiries easily available through the landlord’s website.

3. A Policy of Prevention

A strong policy should aim for a ‘prevention is better than cure’ approach and intervene either before problems arise or when they have just arisen. Screening potential candidates and examining their previous tenancies in terms of anti-social behaviour and rent payments can alert to potential problems.

Therefore some social housing landlords have developed customer profiling strategies to identify potential problematic tenants and conduct financial health checks on new applicants.

However, in social housing the by-passing of unsuitable candidates is not a simple process. There are stringent protocols to follow before people can be turned down for a tenancy.

But forearmed is forewarned, even when you are compelled to accept a new tenant with a chequered payment history, at least, you are prepared and on the alert for future difficulties.

To conduct this more systematically an affordability assessment can be carried out on individuals by looking at their income and expenditure, including benefit checks and asking about earnings. Does the candidate have a full-time job? Are there contracted hours or is it a zero hours contract?

4. A Caring and Supportive Approach

Your policy should certainly take into consideration tenants who may be vulnerable and require support. Due to the ‘Right to Buy’ scheme in the UK a huge proportion of the best council homes have been bought by people in work.

Therefore many council estates are now what is known as ‘residualised’ with a much higher percentage of unemployed and unemployable tenants. This brings challenges for housing professionals in their attempts to ensure tenancy sustainment and financial inclusion for their customers.

Key phrases and essential watchwords through this process might be:

• Flexibility to changing circumstances
• Discretion within the rules
• Respecting individuality
• Supporting vulnerability

A sign of the times is perhaps indicated by a quote from the Chartered Institute of Housing in the UK :

“When it comes to updating policies and procedures, landlords are focusing on those around debt advice services. Very few are looking to change their use of courts procedure. This perhaps indicates that landlords are concentrating less on eviction and more on support."

5. Putting Words into Action

Nevertheless, when it comes to utilising your policy you must be consistent and firm. You actually have to act on your policy. This must be done and seen being done promptly, sensitively, and effectively with a firm, fair and supportive approach.

“Most rent collection problems do not arise because the collection policy is bad, but because it is not followed” (Kaycee Wegener, Rentec Direct)

The best rent collection policies will contain assertive and specific language. Therefore words like “will,” “only,” and “must” often feature heavily to leave tenants in no doubt about the landlord's position and intentions.

Even making words in the text capitalised, underlined, or emboldened on occasion for those not to be missed instructions. Putting this into practice is the key as described by a US association:

“.....successful persuasion can save you money in legal fees and it encourages a cooperative attitude among the tenants.” (Urban Homesteading Assistance Board)

Fairness must be evident in your policy through the word content and in action with non-discriminatory procedures in a process of equity, equality, and respecting diversity.

You cannot directly or indirectly discriminate against any person or group of people on the grounds such as race, religion, disability, gender, marital status or sexual orientation.

Therefore you must:

• Provide an unambiguous message to the tenant right from the start
• Put in place clear and robust procedures.
• Encourage tenants to seek early advice in clearing arrears
• Consider your tenants’ resources and ability to pay
• Not ask or demand that they pay an unreasonable amount
• State the seriousness of failure to reduce or clear arrears.
• Have a clear policy on eviction.

Early intervention is always advised and thereafter should keep to measured timescales and maintain an appropriate frequency of contact using different methods. Face-to-face conversations are always best but not always possible if tenants are unwilling or unable to engage.

Therefore telephone calls, texts, e-mails, and letters can be used and be useful. Written communications, whether digital or printed, have the added benefit of creating an evidence trail. But before you begin any actions you should always bear in mind the legal protocols that are mandatory in the event that the case comes to court.

Your rent collection policy should reflect the requirements of how you conduct arrears procedures and court proceedings. Your policy should make a promise to inform tenants throughout the stages of legal processes and set clear timescales and deadlines.

This includes the recovery of arrears through voluntary agreements for repayment in installments. Your policy should declare that avoiding court is the prime motivation for staff dealing with tenants in arrears and that eviction will always be a last resort when all other avenues have been exhausted.

As explained by a Team Leader at Dacorum Borough Council in Southern England:

“We see every eviction as a failure and work very hard with tenants and other organisations to avoid doing so”

Make tenants aware of the possibility of re-assessment of their cases, the right to appeal decisions in and out of court, and how they can do it. You should also clearly explain your complaints procedure, how they can access this, and how to escalate to external authorities.

6. Reviewing Your Policy

In reviewing your policy take regular samples of random individuals' accounts to exercise quality control and produce perhaps weekly or certainly monthly performance reports.

Participation should always be included in your policy with a commitment to tenant democracy and engagement. Drafts of new policy developments should be presented to tenants to gauge their feelings and explore their ideas.

Promise in your policy that there will be sufficient training and learning to enable staff to provide an excellent service with consistent results.

When it comes to reviewing your policy the rules are:

1. Monitor
2. Analyse
3. Evaluate
4. Implement

Related procedures should be reviewed annually in order to decide whether they continue to be relevant and appropriate. Your policy should be formally reviewed and submitted to an appropriate supervisory body. Ideally, this should be an independent body which will allow you to benchmark your performance against other local authorities and housing associations.

The Rent Arrears Policy should be reviewed regularly, perhaps every two or three years, unless new legislation demands amendments or monitoring and assessment reveals that changes are required.

Conclusion

A successful rent collection policy should be a significant and powerful tool in how you deal with arrears. It sets out not only rules and procedures but also the ethos and culture of your organisation.

Although the bottom line will always be the financial imperative to generate income and maintain services, the human angle should not be forgotten.

Well-trained and motivated staff with a sense of compassion and a willingness to help will enhance the quality of your service. Social landlords need to explore any avenue and exhaust every possibility in supporting their tenants who are struggling with money problems.

When strong action is needed, including the ultimate sanction of eviction, then a directive policy that is clear, unambiguous, and operates within the law will be invaluable.

It will inform tenants of their rights, responsibilities, provide guidance, and reassurance to staff and promote good practice in rent collection.