Those of you who were listening to BBC Radio 5 Live on Friday morning would have heard Claire Sandbrook of Shergroup (http://www.shergroup.net) quoting various statistics regarding the effectiveness of County Court Judgments and revealing that historically only around 30% of County Court Judgments were satisfied within 12 months of the order being made. While there may be some reasons for this highly unsatisfactory figure, former Senior Circuit Judge Paul Collins commented that the system was in need of an overhaul.
Residential landlord’s are all too often victims of this problem as they are often the ones seeking to enforce money judgments against long departed tenants, having had to fight them every step of the way to recover possession of the property. Inexperienced landlord’s are often aghast at the effective extent of protection that even assured shorthold tenants are afforded by virtue of the requirment to serve notices and then to pursue matters through the Court before then applying for a bailiff’s appointment to finally evict often non-paying or anti-social tenants.
My own observations mirror the low recovery ratios reported. Further, rarely can it be commercially justified to instruct a solicitor to relentlessly pursue a judgment debtor for the typical levels of rent arrears or costs awarded in most types of residential possession proceedings.
The enforcement options for creditors with the benefit of money judgments against individual debtors are not without teeth but in practice can all to easily be frustrated. Refusing to open the front door to a bailiff attending to collect a money judgment can frustrate copllection. Calling a debtor to attend Court to answer questioning as to their means seems like an effective sanction but it is often very difficult to verify the testimony given by the debtor if they plead impecuniosity. The costs of proving they were not telling the truth are prohibative. So while there is a system in place, commercial constraints work to undermine its effectiveness.
Therefore, what steps should a landlord take to protect themselves from falling into this enforcement trap? My three tips are:
1.Effective due dilligence at the outset.
By investigating in detail the means of the prospective tenant (including employment references, bank details and references, credit checks) the risk of giving a home to a serial non-payer are reduced.
2. Stringent tenancy criteria
While it may take a little longer to let your property if you are requesting a deposit of 2-3 times the monthly rent, you are less likely to end up significantly out of pocket than if you take only the standard 1 months deposit.
3. Act promptly
The worst cases I see and the ones which cause the landlord to suffer the biggest losses are those where a landlord has given the tenant chance after chance to bring the rent account up to date. Compared to other unsecured creditors, landlord’s start off in a stronger position as ultimately they have the power to remove someone from their home and should ask themselves the question is it better to have a non-paying tenant than no tenant at all?