Guide to making a small claim online
The purpose of this guide is to provide an overview of the small claims process for landlords. In it, we will discuss the various stages that a landlord is expected to follow, the information they are expected to provide, as well as best practice tips for avoiding ever having to use the small claims process in the first place.
This guide is designed for landlords who are representing themselves in court for a straightforward rent arrears case, or seeking to claim less than £10,000 from a tenant or guarantor. Where a solicitor needs to be employed and the damages exceed £10,000 then the process can take longer and will require you to follow the Pre-Action Protocol for Debt Claims.
Chasing a tenant through the courts to repay debts can be an arduous, time-consuming process. Furthermore, many tenants lack assets and so debt that builds up may never be repaid. As such, the best advice for landlords is to prevent the arrears from building up in the first place. There are a number of practical actions that a landlord can take to minimise the chance of arrears building up.
Tenants with a persistent history of rent arrears or other problems with paying their debts can often be identified through their credit history or what their employer or current landlord say in a reference. Tenants with a poor credit history are more likely to end up in arrears than a tenant who has an excellent credit score.
The RLA recommends that our landlords should fully reference all of their tenants to try and minimise the risk that they will end up with a persistent non-payer as a tenant. The RLA Tenant Referencing service includes a credit check and an assessment of how much the tenant could reasonably pay in addition to the referencing, providing a landlord with all the information they need to make an informed decision.
Where a landlord is confident they can organise and check the references and payment ability themselves, then they will still need to credit check their tenants before giving them a tenancy. This will provide a score by which landlords can estimate how likely it is that this tenant will fall into arrears .
Sometimes, a tenant may love the property so much that they are willing to pay more than they can afford to move in. A sensible landlord however, will be keen to get a tenant in who won't struggle to pay the rent and should make sure the tenant can afford their share of the rent before
As a general rule affordability is calculated on the principle that the tenant's share of the rent should not exceed 30% of their wages. This may vary in certain parts of the country such as London but a tenant who meets that criteria should be able to pay their rent without too much issue.
Where the prospective tenants have failed to meet the affordability criteria, or they have a poor credit score, a landlord may still wish to rent the property to them. In that case, the landlord should require a suitable guarantor so they have a better chance of recouping any losses that occur.
A suitable guarantor is someone in full time employment, with no prior credit issues, earning enough to meet the affordability test above, a UK resident, and preferably also a home owner in the UK. If the tenant can provide someone like this, then a landlord will be able to rent out the property to the tenant as they have someone with assets that they can seek any arrears from. This is very typical for landlords who rent out to students for example, as the students are too young to have a credit history and they are not in full time employment.
The RLA provides two different deeds of guarantee to suit the different needs of our landlords. These documents are free to download for all full members of the RLA. Landlords should ensure that the deeds are signed prior to the tenancy being signed or this deed will be invalid.
Benefit Payments and Minimising rent arrears
The most likely tenants to be in rent arrears are those in receipt of some form of housing benefit payment. This is not surprising as housing benefits are usually paid in arrears and quite often do not cover the entire rental amount.
Landlords renting to tenants that are reliant on benefits payments are advised to check on their payments regularly. Tenants may benefit from some assistance navigating events such as benefits sanctions, changing circumstances on Universal Credit, or administrative errors. While it is not the purpose of this guide to advise landlords on how to seek these payments for their tenants, landlords may be able to help their tenants avoid ending up in arrears if they can direct them to assistance. Universal Credit claimants for example can ask for an advance on their payment to help with the rent while other claimants may wish to contact their council for assistance with housing payments.
Even where a landlord does everything right, finding a model tenant with a great credit score, circumstances can change. A tenant may lose their job for example. In those circumstances a landlord who has rent insurance will suffer only a minimal disruption to their payments.
Staying in contact
Landlords who regularly check that payments are made on time will be able to contact their tenants as soon as rent arrears start to develop. If rent arrears are allowed to build up, then tenants are less likely to ever pay that money back. Landlords are advised to contact their tenants by phone as soon as they notice the rent has not been paid on time. Most tenants will pay shortly after being contacted, but if rent arrears continue to grow then landlords may want to start possession proceedings to minimise their losses instead of starting an action in small claims. The RLA provides both Section 8 and Section 21 Notices for our members along with comprehensive completion notes to help them gain possession. For advice on which notice should be used, members should contact the Landlord Advice Team on 03330 142 998.
Formal actions before court
If a tenant continues to ignore phone calls regarding the rent arrears and the landlord does not wish to evict, then they should begin to prepare for action in the small claims court. Before starting a claim, landlords will be expected by the court to show that they have complied with the Practice Directions on 'pre-action conduct'.
What is the 'Pre-Action Conduct?
At its most basic the pre-action conduct sets out the expectation that landlords and tenants will communicate clearly with each other and make a genuine attempt to avoid going to court. To do this, the Pre-Action Conduct Practice Direction gives clear instructions on communications, steps to take before applying to court, and time frames for responses.
The court expects that before commencing action, both the landlord and tenant will have communicated enough that they -
- understand each other's position;
- have made decisions about how to proceed;
- tried to settle the issues without resorting to proceedings;
- considered a form of Alternative Dispute Resolution (ADR) to assist with settlement;
- supported the efficient management of those proceedings; and
- reduced the costs of resolving the dispute.
In practice this means that the first steps involve the landlord writing to the tenant. By the final letter, the landlord should have set out the current arrears, given a statement showing how the arrears have built up, detailed any interest the landlord intends to charge, any additional costs, including the daily rate by which the interest is charged, and the amount of time which the tenant has to respond to the landlord's demands.
How long should I give the tenant to respond?
The Practice Directions advises giving the tenant 14 days to respond in straight forward cases.
Providing this in writing shows evidence to the court that a landlord has made a genuine effort to comply with the Pre-Action Conduct Practice Directions and will stand landlords in good stead, particularly if a tenant ignores their attempts to discuss this before court.
The RLA provides a number of rent arrears template letters to help landlords. We highly recommend that you send them in the order laid out in the link to show you have tried to minimise costs and resolve the dispute without involving the courts. However, the information discussed above is all contained in the letter below.
Are landlords required to go through mediation before applying to court?
Landlords are not required to go through mediation, however if it is requested then the courts are likely to take a dim view of the party that refuses mediation without a very good reason.
Applying to court
Once the landlord has exhausted their options to avoid court, they can then apply for a court order on the Moneyclaim website. This online portal is available for most claims below £100,000 provided the amount is fixed.
The first step will require the landlord to register for the site and input all the required information. You will need a working email address to be able to register on the site.
Landlords will normally register as individuals however you should consider your own business set up and register accordingly.
Once you have pressed submit on the 'Register for a Government Gateway Account' page you will be provided with a user ID. This information will not be emailed to you and is not retrievable, so you must write your UserID down and store this somewhere safe.
Similarly, once you have completed your registration information you will receive an MCOL Customer Number. This should also be written down and stored as the court will ask you for this when discussing your case.
Remember to check everything before you complete submitting your information.
Starting a claim
Once registered, landlords can start a new claim from the main Moneyclaim page.
Landlords are expected to familiarise themselves with the Moneyclaim guidance materials so that they fill in the forms correctly. This includes being aware of the fee they will have to pay -
|Claim amount||Paper form tree||Online claim fee|
|Up to £300||£35||£25|
|£300.01 to £500||£50||£35|
|£500.01 to £1,000||£70||£60|
|£1,000.01 to £1,500||£80||£70|
|£1,500.01 to £3,000||£115||£105|
|£3,000.01 to £5,000||£205||£185|
|£5,000.01 to £10,000||£455||£410|
If you do employ a solicitor remember that you will not be able to claim for their fees when making a claim below £10,000.
The landlord will normally not need to fill out the claimant's details as they will have already provided their address when registering. They will need to provide a valid address and the full name for each defendant (the tenant or guarantor) however. This address will need to be in England or Wales and must be served to their last known or usual residence address. If the tenant is still resident in the property then it will be this address, if the tenant has moved out and the new address is known then it would be that.
If there is no known address, the landlord should consider employing a tracing service to find the tenant. This report will usually also indicate whether it is financially worthwhile chasing the tenants, giving a report on income, assets, etc. A number of tracing services offering discounts are available on the RLA supplier's guide.
The Moneyclaim website is not suitable for more than 2 defendants. If the landlord intends to sue more than 2 people at a time then they should contact the County Court Money Claim Centre for advice.
Particulars of the claim
The particulars of the claim detail why the landlord is making the claim and a statement on how much money is owed. The online portal is limited to 1080 characters so landlords must be brief or they will have to send the particulars of claim directly to the tenant, as well as filling out an N215 form.
Example of potentially suitable wording
'On (date), arrears of rent and interest charged total £V. The Defendant's arrears began on (Date).
Landlords who do charge interest should ensure they have selected yes in the tick box and calculated the total interest owed at the point of the claim. This should then be added to the rent arrears for the total amount of money claimed.
Claims made through Moneyclaim are for a fixed amount so landlords should avoid including a daily rate of rent in their claim as that would not be claimable.
The County Court Act allows the claimant to charge for 8% of the debt on a daily basis. This is calculated using the following formula –
(amount of arrears) x 0.08 / 365 x (amount of days since the arrears started) = total interest
So, for example, on 17th December 2018 when the landlord submits the claim, they are owed £1000 in rent arrears. If we multiply this amount by 0.08 then we receive a total of £80. This amount is then divided by 365 to get a daily interest rate of 22 pence per day. The tenant first went into rent arrears 61 days earlier. Multiplying 22p by 61 we get the final interest total of £13.42. This leaves a final total for the claim of £1013.42.
The landlord will then be presented with summary and statement of truth to sign. Once they are satisfied they can submit the claim and make payment.
Once a landlord pays for the claim to be started it cannot be amended or cancelled without the permission of a District Judge. This is difficult and expensive so check everything on the summary is correct before submitting and paying.
Once a landlord has submitted the claim then the court will normally issue a claim pack to each defendant within 2 working days. A further 5 working days after that date, the claim pack will count as served on the defendants.
After the claim pack counts as served on the defendant they have a further 14 calendar days to respond. This can be extended to 28 days if they file an acknowledgement of service.
No response from the claimant
If the tenant does not respond within this timeframe then the landlord may go straight to entering a judgement on the Moneyclaim portal. It is vital that landlords wait until all of the above time has passed before proceeding.
For example, the landlord submits the claim on Monday 10th December 2018. On Wednesday 11th December 2018 the court issues the claim document. This counts as served on 17th December 2018, 5 working days later. The tenant has until 31st December 2018 to respond to the claim. Therefore, if no response has been made, from 1st January 2019 the landlord may then apply for a judgement where the defendant pays in full.
Payment and repayment offers
Where the claimant pays in full before a judgement is made, then it is the claimant's responsibility to update the claim via the 'update claim status' link on the Moneyclaim homepage. They should only do this once payment has cleared into their account instead of upon receipt of a cheque.
Where the tenant acknowledges the debt in full, and offers a payment plan, the claimant must stop using the online service and send an N225 form to the court handling the claim. The landlord must state whether they accept the proposed repayment plan or whether they seek a different repayment option. If they do not agree with the repayment plan, they should include a letter stating the reasons why the landlord is rejecting it attached to the form.
For part payments the landlord will be asked whether they wish to chase for the full judgement as a defended case or accept the repayment plan for the lower amount. If they do not accept the repayment plan, they should fill out an N225A form and submit it to the court manually. If they wish to challenge the proposed amount, then they will be provided with a questionnaire by the court and a copy of the defence. This should be returned as soon as possible to the court.
A claimant has a number of additional defences available to them other than payment. These vary between a full defence stating that the amount is not owed, a defence that the money was owed but already paid and a defence with a counterclaim attached. In all instances, the landlord should follow the instructions of the court, this will lead to them completing the directions questionnaire and returning it to the court.
When a case is defended, and both parties have filed their directions questionnaire, the case will then either be referred to the free telephone mediation service first, or transferred directly to the local county court of the defendant for a hearing. Landlords will be provided with
Once a date is set, landlords are advised to make every effort to appear in person. Claimants and defendants who are absent are much more likely to lose their case even where they have asked the court to deal with the case in their absence. Similarly, while it is possible to request a postponement, it is advisable to simply go on the day chosen by the court.
Once a court hearing has been called, the case can no longer be updated via Moneyclaim. As such the claimant will have to deal directly with the court handling the case for anything further.
Registering a judgement
If the defendants fail to respond or send you an admission form with an acceptable payment plan, the claimant can register a judgement via the Moneyclaim online portal. This can be done against both defendants or either of them individually via the portal.
There are two types of judgement available to select from -
Where the defendants have not responded to the claim in the time frame, the landlord should select the option Judgement by Default.
Where the defendants have admitted all the money is owed then the landlord should select the option Judgement by Admission.
Once a judgement type has been selected the claimant can decide whether to request payment in full immediately, in full after a certain date or in instalments.
Where the defendants have ignored the claim most landlords will request a judgement in full immediately but they are free to select payment by a date or in instalments if they wish.
Where a tenant has proposed a payment plan the landlord must accept it if they wish to use Moneyclaim to register the judgement. The defendant will then be expected to keep up with the payment plans or pay by the agreed date. If not, they would submit the N225 form to the defendant's local court to reject the payment plan.
Once the judgement has been registered it will be processed and added to the register, showing up on credit checks and crucially being enforceable if the tenant does not make payment. This is known as a county court judgement or CCJ.
What if the defendant does not pay in line with the judgement?
The claimant has a number of enforcement options where the defendant fails to pay. The RLA guide on enforcing judgements covers this in detail. Landlords should consider their options carefully before proceeding to enforce judgements. The defendants may lack assets, meaning the landlord is adding further costs with no chance of recouping it for example. Where the tenant does have assets the claimant should consider which option is likely to recover money faster. For example, a guarantor who owns a home may be suitable for applying for a charge on the property but as this does not compel the guarantor to sell, an attachment to their earnings may be more suitable.