One of the main concerns for landlords is the risk of rent arrears. However, less than 2% of rental contracts are in arrears. While there are now ways ofavoiding unpaid rent, the best technique is to reassure yourself with a thorough knowledge of the procedure for recovering unpaid rent and the assistance of a property lawyer specialising in rental disputes.
A firm of property lawyers will advise and defend you from the very first rent arrears. First of all, they analyse the situation of the property and the parties involved. What type of lease is in force? Is this the first rental dispute? Are there tensions between the landlord and tenant? Are there latent sources of dispute over the security deposit, vacating the premises or work to be carried out?
When renting out residential or commercial premises, the services of a property lawyer are very useful beforehand, to ensure that the residential or commercial lease is drawn up correctly. During the rental period, he will assist the parties in the event of a breach of any of their obligations, such as the payment of rent. Depending on the situation, the lawyer will find a suitable amicable solution or take legal action to recover the sums owed, or even to obtain judicial termination of the lease and eviction of the tenant.
As a preamble, here are a few figures from the Ministry of Justice: 147,000 court proceedings to obtain the eviction of a tenant were brought in 2017. There are over 11 million tenants in France. This means that legal proceedings concern 1.3% of tenants. There may have been an increase in this figure over the last 2 years, as a result of the health crisis. In addition, there are also out-of-court proceedings for late payment of rent or unpaid bills that are eventually settled.
Unpaid rent: what can landlords do?
Whatever the type of lease, residential or commercial, the tenant is obliged to pay the rent and service charges on the contractual due dates. As soon as a payment is late for the first time, the landlord must react by calling or writing to the tenant. In many cases, this may be due to an oversight or a problem with a bank transfer or a lost cheque. The relationship between landlord and tenant will not suffer as a result. Unpaid rent can happen to anyone as a result of a temporary cash-flow problem.
Landlords act quickly at the first sign of non-payment
If the rent continues to go unpaid, the landlord must be vigilant. They need to start building up a file of evidence. To do this, they send the defaulting tenant a formal notice to pay the rent within eight days by registered letter with acknowledgement of receipt.
This amicable procedure for recovering unpaid rent is optional. If necessary, it will show the court the landlord’s willingness to act and his good faith. At this stage, any landlord can contact a lawyer specialising in tenancy law to take charge of the amicable procedure. This relieves the landlord of the burden and may encourage the tenant to settle the rental dispute quickly.
Landlords can also contact a conciliator. The conciliator’s role is to help the parties reach an amicable agreement more quickly than they would have to go to court.
Landlords inform third parties of non-payment of rent
At this stage too, the landlord is obliged to inform the CAF (Caisse d’allocations familiales) if the lessee is receiving housing benefit. If the housing benefit is paid directly to the landlord, the CAF considers that the tenant is in arrears when 2 months’ rent and service charges are due, or when the tenant has not paid the balance for 3 months. The CAF requires an amicable procedure to be followed and a payment plan to be drawn up. This plan takes the form of an agreement to spread the tenant’s debt. If no agreement is reached within 6 months, the CAF will suspend payment of the housing benefit. A lawyer specialising in tenancy law can give you sound advice on the clauses to be included in a payment plan for rent arrears.
This is also the time to call in the deposit or unpaid rent insurance. Each insurance policy or guarantee against unpaid rent has its own very strict procedure and deadlines.
The out-of-court procedure for unpaid rent can be continued with a summons to pay or a summons to pay issued by a bailiff. In other words, the tone between landlord and tenant is getting tougher. The support of a lawyer is invaluable in maintaining calm and serenity.
Termination of a lease following non-payment of rent
If the lease contains a resolutory clause for non-payment of rent, the landlord can use it to terminate the lease. To do this, the landlord instructs a bailiff to issue a summons to pay. If the order to pay remains unsuccessful after 2 months, and if the tenant has not paid either the rent or the bailiff’s fees, the landlord can take the case to the court to have the lease terminated. The tenant can avoid this by paying the rent or by asking the judge to spread the payment of the rent. French law is fairly protective of tenants.
Taking legal action to obtain payment of rent
If all amicable procedures fail, you can take legal action for unpaid rent. The court can order the tenant to pay the rent owed. Judges may also order the lease to be terminated and thetenant to beevicted as a result of unpaid rent.
The court order will be served by a bailiff. Depending on the tenant’s situation, the bailiff may then initiate collection proceedings by seizing furniture, garnishing wages or seizing bank accounts. Once the writ of execution has been obtained, there are a number of enforcement measures that can be requested from a bailiff, who is the only person authorised to enforce a court order. Your property lawyer will support you throughout the recovery of unpaid rent.
Tenants can apply to various bodies for assistance. If the tenant has debts with several creditors, the over-indebtedness commission will intervene to help the tenant spread out his debts. Be careful, though, as the commission can also wipe out the tenant’s debt! A rent debt will then take priority over other creditors. The Housing Solidarity Fund (FSL) can also help people in difficulty to pay their rent. These organisations require files and formalities to be drawn up. By calling in a lawyer from the outset of a tenancy dispute, landlords can also help their tenants find the right solutions.
Landlords have 3 years in which to claim any unpaid rent or service charges, even after the tenant has moved out. Recovery of unpaid rent after the tenant has been evicted is possible, but requires patience.
The different ways of avoiding unpaid rent
How can you avoid unpaid rent? Nothing beats prevention! A lawyer who is an expert in tenancy law can help you put in place the best strategy for your situation, your home or business premises and your tenant.
Include a resolutory clause in the event of unpaid rent
First and foremost, drafting your lease properly is the best way to avoid rent arrears. Including a resolutory clause in the lease makes it easier to terminate the contract if the tenant is in arrears. A property lawyer can help you draft the right clauses, in full compliance with the law. If there is no resolutory clause in the lease, the landlord must apply to the court to have the lease terminated.
Of course, choosing a tenant and checking his or her resources is also an essential preliminary step. However, this is not enough to avoid all problems of unpaid rent, as the situation can change so quickly. On the other hand, if the landlord uses the services of a professional, the estate agency may be held liable if it is negligent in its choice of tenants. You can also ask your tenant to pay housing benefit directly. This ensures that part of the rent is paid. This is not enough, however, and should be supplemented by one or other of the following measures: a deposit or unpaid rent guarantee.
Arranging a deposit to pay in place of the defaulting tenant
There are several types of guarantee against unpaid rent, and they cannot be combined: an individual guarantor, also known as a surety, a corporate guarantor under the Visale or GarantMe systems, or an unpaid rent guarantee (GLI ), which is insurance against unpaid rent.
Similar conditions apply to guarantors as to tenants: documents required and grounds for refusal. For example, a landlord cannot refuse to take on a guarantor on the grounds that the person is a foreign national.
Theundertaking given by the guarantor, a natural person, must be unequivocal. To achieve this, the compulsory details must be given, such as the amount of rent in figures and words, the conditions for terminating the commitment (if it is for an indefinite period) and the exact extent of the commitment in the case of shared tenancy.
There are two types of guarantee:
- joint and several guarantee: the guarantor is called upon as soon as the rent is not paid, at the same time as the tenant.
- simple guarantee: the guarantor is only called upon after unsuccessful formal notice has been given to the tenant.
The joint and several guarantee is therefore simpler to enforce and provides greater protection for the landlord. Since 25 November 2018, it has been possible to draw up theguarantee deed electronically. There is no need to copy out the guarantee by hand, as was previously the case.
Unpaid rent cover
Unpaid rent guarantees such as Visale or GarantMe require a specific procedure. The assistance of a lawyer will make your life easier when it comes to implementing these guarantees in the required form and within the required timeframe.
The Visale guarantee, managed by Action logement, is issued under strict conditions relating to the amount of rent, the tenant’s resources and the geographical location (accommodation in Paris, the Paris region or the provinces). Unpaid rent insurance
The unpaid rent guarantee is an insurance scheme. In return for payment by the landlord, the insurance covers the tenant’s failure to pay the rent. The conditions under which the insurance is triggered are very strict. So while this solution may seem simple and reassuring, in reality the landlord will have to be meticulous in taking action within the time limits and in the form required.
Late rent payments are not the only problem between a landlord and a tenant. Other disputes may arise, such as problems with neighbours, disagreements over who is responsible for carrying out the work, or the apportionment of charges, etc.
Goldwin Law Firm can help you manage and deal with property disputes at any stage in the performance of your residential or commercial tenancy agreement. The firm has all the legal skills and experience of dealing with complex cases to support out-of-court or contentious procedures.
Our lawyers work with landlords and tenants throughout the lease to prevent and manage unpaid rent. The presence of a lawyer reassures the landlord and ensures that nothing is overlooked in the various pre-litigation and litigation phases: informing the social security bodies at the right time, sending the right information to the bailiff, adopting the best strategy for recovering the rent owed quickly, taking action with the guarantor or the unpaid rent insurance or taking legal action to recover the sums owed.
Our property lawyers know how to implement creative strategies to defend the interests of those involved in property ownership:
