I often get baffled, and sometimes even bewildered, when I read some of the comments investors make on social media about their tenants, or particularly their ex-tenants. You’ll see things like, “my tenants just left but would you believe they didn’t even vacuum the bedroom carpet?” Or, “oh, my tenants just left but there were some jammy fingerprints on the kitchen wall.”
And I read that and I think, you must be new investors. Because when you’ve owned enough properties for long enough, you will get tenants who do a lot, lot worse than that, believe me.
It’s a numbers game
When you’ve owned multiple properties for many, many years, then unfortunately, because it’s a numbers game, you are going to get tenants who cause damage, you are going to get tenants who don’t pay the rent, and you’ll have tenants who leave long before the tenancy ends and without giving you notice. And if you’re really unlucky, you’ll have a tenant who does all three of those.
I had one set of tenants who, in today’s money, cost me about £15,000. I’m going to tell you exactly what they did, because I think this story is one of the best ways of illustrating just how much chance plays a role in this, and to warn you about what they did, so that you can be aware of it and hopefully head off problems if they ever come your way.
The house, and the day the rent stopped
The property I’m thinking about was one of the very first properties I ever bought. It was a nice terraced house in a small village, and I refurbished it to a good standard. Unusually for me in those days I let it furnished, because that’s what the local market expected. The tenants came in the normal way, which in those days was a newspaper ad run by my managing agents. I wasn’t involved in the letting at all, that was all done by the agents, and everything seemed fine until the day that the rent stopped being paid.
My managing agents contacted them and they talked about it, but after a series of flimsy excuses and pushbacks, and promises of rent that would be paid but never appeared, we realised, with some regrets, that the only way the situation was going to be resolved was by serving notice and taking possession. And that’s when things got really interesting.
The counterclaim
By this time the tenants were about six or seven months in arrears, and there was no sign that they were going to pay. But as soon as we lodged the papers to take possession, they instantly came back with a counterclaim for disrepair. The disrepair was a hole in the kitchen ceiling underneath the bathroom, and the reason it was there is that the tenants had let the bath overflow in the first place. Having said that, the hole was tiny. It was more like a blemish, and you had to look really hard to see it. The tenants had caused the damage, minor though it was, and now they were claiming against me for it.
What made it worse was that they’d never reported it to the managing agent. The first we heard about it was when the possession papers went in. That instantly escalated what would have been a routine possession case into something much more serious.
Somehow or other the tenants managed to get legal aid, and they persuaded a local solicitor to put all sorts of things in writing in the claim which just weren’t true. I suppose solicitors just have to do what they have to do, and they get paid to do it, but it was really annoying. There was a real sense of injustice about it.
The morning of the hearing
As the case escalated I had to appoint my own solicitor, and as it dragged on he appointed a barrister, and slowly but surely the case headed towards a hearing at the local county court. The reality, though, is that the cost of actually going to court meant it was worth one more try. So about a week before the hearing, through my solicitor, I made the tenants an offer: if you leave voluntarily now, I’ll write off all of the rent arrears. By then that was probably ten months, a year’s worth.
Their solicitor came back and said no, we think we’ve got a solid case.
So the morning of the hearing came, and of course I had to pay my solicitor to be there. He charged half a day, and the barrister charged a whole day, regardless of how long it took for the case to be heard. I can’t remember whether it was due to be heard at 10 or 11 o’clock, but as I walked up the steps of the court and into the atrium, my solicitor came over with the barrister and said, the other side want to do a deal.
So of course I said, what are they offering? And the solicitor said, they want to accept the offer you put forward last week. Exactly the same deal they’d rejected.
Now, to say I was angry was an understatement. The barrister had been at court for about half an hour, but I had to pay him for the full day, and I’d have to pay my solicitor as well, and in today’s terms that’s probably about £2,000. It seemed clear to me that the tenants had always intended to accept the offer, and their game plan was to cause as much mayhem and distress and time wasting and money wasting as they could.
So I was livid with the tenants, but I was also pretty annoyed with the barrister, who, having done virtually nothing, was quite happy to take a full day’s money off me and then disappear after being at court for no more than an hour. And presumably he went back to his office and did the best part of a full day’s work anyway. But it was the way it was, the deal was written up and registered at court, and that was that. Or so I thought.
Except it wasn’t
Even after all that, the tenants didn’t leave on the day they’d agreed to leave. So I had to get the solicitor involved again and apply for bailiffs. But the local bailiffs were extremely busy, and it was literally going to be months until they could attend, so in the end it was arranged that bailiffs from a different jurisdiction would come over and deal with the eviction. All of that took another two or three months, and of course I wasn’t receiving any rent during that period either.
On the day they finally went, my managing agent rang me to tell me the good news. I said, how did it go, what happened? And he said, not much really. They came out, they loaded their van with their furniture and they drove off, and that was it. And I said, hang on a second, what do you mean they drove off with their furniture? They didn’t have any furniture. That was my furniture. The managing agent had completely forgotten that we’d let the property furnished, and he’d actually let them take it right in front of his very eyes.
But even that wasn’t the end of it. As one final insult, about three days later the tenants came back and broke back in. Why? I don’t know. I have my suspicions, but I honestly can’t say, and I’m not going to say publicly. So now the agent had to get them out a second time, but that’s a story for another day.
All in all, there was more than a year of lost rent by then, plus the court costs, the costs of applying for possession, the solicitor’s bills, the barrister, the bailiffs. And in today’s terms it probably cost me more than £15,000.
What I make of it
So what do we make of all this? Looking back, I think these tenants were professional system gamers. They knew exactly how to play the game. They knew they could claim for a lack of repair even though they’d caused the lack of repair. They knew to say nothing until the papers went in, which they knew would be inevitable once they’d decided to stop paying the rent after only a couple of months in the property. They knew how to get legal aid, and they knew how to get a solicitor to say things which were highly questionable at best. And to be honest, I think they’d planned the whole thing before they’d even moved in.
But as I say, it’s probably a numbers game. If you own enough properties and you’re in property for long enough, then unfortunately at some point you are going to get a tenant who doesn’t do the things you’d like them to do.
What you can do to protect yourself
There are things you can do, and they do make a difference. Take your time to research managing agents and find a good one for your area. Make sure the managing agent takes proper references. Make sure you take a proper deposit. And definitely think about rent insurance. The trouble is that if you pay for rent insurance and nothing happens, and you have a succession of good tenants, it feels like money wasted. But I can tell you that when you have a bad tenant, it’s money well spent.
Chances are that most of the time you’ll get good, decent tenants, and when a bad one comes along you just have to be prepared and ready, and able to take it on the chin, because there’s no way of getting rid of the risk altogether in property.
So if you’ve been put off renting out property because you think, knowing my luck, I’ll just get a run of bad tenants, all I can say is that my bad tenant was just one bad one in a run of many, many good tenants. And when you’re reading comments from other investors on social media, moaning about a tenant not vacuuming the bedroom carpet or leaving a jammy fingerprint on the kitchen wall, you can think like me: goodness, if that’s all you’ve got to worry about, you’ve really got absolutely nothing to worry about.
Here’s to successful property investing.
Peter Jones
Author, property investor and ex-Chartered Surveyor
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