2. MANAGING RENT ARREARS
9. The pre-action requirements set out what landlords must do, as a minimum, before taking action to evict a tenant. Nothing in this guidance prevents a landlord from doing more to support tenants facing financial problems.
10. Where landlords' practice already gives greater protection to tenants with rent arrears, that practice should continue. Landlords should however make sure that their internal procedures are consistent with the pre-action requirements.
11. Making new tenants aware of their responsibilities when landlords allocate a home, including the need to pay rent and the implications of not doing so, can help to result in a long-term, sustainable housing solution. Many landlords help tenants by:
- helping with housing benefit applications in order to prevent a delay in the payment of housing benefit that can result in rent arrears building up; and
- referring to advice agencies or in-house specialists for, money advice, welfare benefit checks and other financial help.
12. Most arrears appear to arise through a change of circumstances or because tenants get into difficulty with the general management of their affairs. The first consideration then is about identifying and where possible resolving the issue that has resulted in the tenant falling into arrears. Early personal contact may prevent more acute problems developing in the future.
13. The point at which a landlord takes the decision to seek repossession of a property is a matter for each landlord. Rent arrears have an impact on landlords' finances and may have an impact on the services they deliver to their tenants. Landlords need to balance these impacts with the impact on individual households of losing their home. There are however occasions when tenants fall into arrears for short periods of time or for technical reasons, such as banking delays or Housing Benefit payment cycles.
14. The basic principle that underpins this guidance is that landlords and tenants must do all that they can to resolve the arrears before landlords take action to evict.
15. Under the Bankruptcy (Scotland) Act 1985 (as amended), a landlord cannot generally recover rent arrears through court action once a tenant has been sequestrated.
16. The decision around whether to stop eviction proceedings that are ongoing when sequestration proceedings begin is a matter for the landlord. Landlords should be aware, however, that payment of arrears to a landlord by an insolvent debtor may run the risk that the courts would find this an unfair preference to one creditor over all creditors under section 36 of the 1985 Act. As such other creditors could challenge the payment of arrears.
17. In cases where a tenant is sequestrated before the landlord starts eviction proceedings, the landlord should consider not taking, or threatening, action to evict if the arrears are not paid. Attempting to collect rent arrears in this way could lead to challenge by other creditors, also a sheriff might not consider eviction reasonable in these circumstances.
18. It is recommended that the landlord seeks to recover as much as possible of the arrears through the sequestration process and writes off the remainder of the arrears at the point of sequestration, treating this as a debt no longer due. Whilst rent is technically still due to the landlord, legally the debt is irrecoverable. But if the tenant fails to pay rent that is due for a later period, court action may be taken to evict on the basis of those subsequent arrears. In that situation, the pre-action requirements should only need to be undertaken by the landlord in relation to the subsequent arrears.
19. Where a court sequestrates a tenant after court proceedings to repossess a property have begun the landlord will have already met the pre-action requirements. If the landlord wishes to continue to pursue eviction action, the decision around whether eviction is reasonable is one for the court to decide.