Advice Sought from Fellow Landlords – tenancy agreement periods and monthly payments

by Property 118

9:26 AM, 17th July 2012
About 6 years ago

Advice Sought from Fellow Landlords – tenancy agreement periods and monthly payments

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Advice Sought from Fellow Landlords – tenancy agreement periods and monthly payments

One of our readers has requested some advice from his fellow landlords reading this Newsletter. I could simply respond but I’m hoping that by publishing his request he will receive more than just my opinion.

“As an avid reader of the Property118 newsletter and the associated discussions I wonder if I may ask my fellow landlords a couple of questions related to Tenancy Agreement Periods & Monthly Payments (PCM).

The background being that my wife and I have entered the landlord position by default in respect of my daughters property (modern 2 bed terrace) – 80% for which we have provided a interest free loan.  She has subsequently got married and now lives in Singapore with her husband and one year old son.

Firstly what rental agreement period would you recommend – 6 or 12 month initial period and what do you see as the pros & cons of each ?

Secondly having had a previous tenant that occupied the property for approximately 3 years we carried out a complete redecoration last February and let it on a 6 month AST Agreement commencing 11/02/12. Since the prospective tenant was not moving to the area until this date and the redecorating was not complete before we agreed that February’s rent would be calculated on a pro-rata basis.  However since our previous tenant had given one months notice such that we were obliged to enter into a pro-rata calculation for January’s rent we determined that future tenancies should be based on a per calendar month basis.  It now transpires that our new tenant wishes to move to a more expensive apartment in the centre of town (Bristol) and has given one months notice but again mid-month and expects a corresponding pro-rata rent calculation, which was exactly what we were trying to avoid by making the rent PCM.  Whilst all references to pro-rata calculations were deleted from the standard agreement I do recognise that by dating the Agreement commencing 11/02/12 we have in some way or other shot ourselves in the foot and have therefore agreed to the tenants request to pay August’s rent on a pro-rata basis.  Accordingly for future tenancies my question is this, if we made the effective date of the Agreement 1st of whatever month was appropriate and regardless of when occupation actually commenced would this solve our problem of mid month terminations?

Your thoughts on the above would be greatly appreciated,  many thanks.  Donald”



Comments

9:42 AM, 17th July 2012
About 6 years ago

We often recommend 12 months contracts with a 6 month break clause as this is an effective way of resolving issues if they arise and before they escalate. Few tenants want to move after 6 months, but you don't want to be stuck with a nuisance tenant when you don't have to. Nevertheless, some tenants want security and may insist on a straight 12 months in which case there references must be even more carefully considered.

I am not certain why a mid month commencement date is an issue. Calculating pro rata rent is very straight forward as I am sure you know. Nevertheless, the effective date must be the commencement date on which possession is granted. I strongly recommend that you are not tempted to alter this for whatever reason as when it comes to relying upon a section 21 notice, the dates can be seen to cause uncertainty - particularly if the tenancy becomes a statutory periodic tenancy where notice is only effective from the next period of renewal, not necessarily the rent due date. Never give the Court reason to question a notice as they will if they can.

My advice is keep it simple and don't create potential pitfalls in the event things go wrong.

Mark Alexander

9:57 AM, 17th July 2012
About 6 years ago

You beat to to it Eric, spot on. Note for Donald, Eric is one of the founders of SafeAgent. You will not get better advice even if you pay a lot of money.

10:16 AM, 17th July 2012
About 6 years ago

Personally never offer more than a 6 month AST.
If the tenant wishes to not go onto a SPT then they can pay ther admin fee for issuing another DPC.
I have never had any tenant want to renew a AST; they have ALL proceeded onto a SPT.
Quite frankly a AST is not worth the paper it is writen on.
If a tenant left 2 months before a 6 month tenancy expired, what could a LL do!
Basically nothing.
Ok the tenant would lose their deposit; but all they would do is default on the rent payment the month before they knew they were going to leave and then leave.
As a LL there would be effectively nothing you can do.
Are you going to waste your time chasing a tenant through a county court, pray tell where would you serve and enforce any judgement.
An AST is only of any use to a tenant to prevent a LL getting rid of him before a AST period is finished.

Mary Latham

10:47 AM, 17th July 2012
About 6 years ago

The safest way for a landlord to set up a tenancy is by giving a 6 month fixed term, the tenancy cannot be ended by the landlord during the first 6 months anyway unless the tenant has given you ground to use a Section 8 and granting a 6 months fixed term formalises this. The tenant cannot legally give notice during a fixed term. Following the initial fixed term - do nothing and the tenancy will automatically become a Statutory Periodic, which means that the tenant can give one months notice ending the day before a rent due date and the landlord can use a Section 21 notice to give 2 months notice ending on the expiry of the day before the rent due date.
As has been said a landlord should have just ONE DATE on the AST - the start date which is also the rent due date and this avoids complications should you need to use Section21.
I have tenancies that have run now for 15 years but I have never renewed the AST. I have a rent review clause which allows me to review the rent annually and all other terms and conditions remain the same.
I know that some landlords feel that by renewing the AST every 6 months they have more control over their income because the tenant should remain for the fixed term BUT, has already been said, if a tenant moves out during that time there is really very little you can do about it. Who wants to keep a relucatant tenant?

11:18 AM, 17th July 2012
About 6 years ago

Just a couple of observations, though of course Landlords must do what they feel is best and what works for them in their area. Mary is of course quite correct regarding the s8, though in reality, the chances of getting possession under this procedure within 6 months is unlikely. Whatever the breach, it would be better to simply rely on notice under s21 to gain possession as this is more cost effective, and with London Courts, quicker. I profoundly disagree with the view that an AST is not worth the paper it is written upon as one discovers if ever you are before a Judge. For example, the 'forfeiture' or 'proviso for re-entry' clause is essential or you simply wont get possession for arrears. Likewise prior notice grounds and enforcement of the tenants obligations need to be clear and unambiguous. I have seen many Landlords with outdated TA's regret not amending them.

I understand the opinion regarding renewals however offer an alternative point to consider. Tenants want some security, not just because of removal costs, but with all the press reports of rents rising, it can provide confidence. Further, one must remember that whilst a Landlord must serve notice, a tenant isn't obliged to do so. I accept that if neither party does anything, a SPT is created. However, one must remember that a fixed term expires with the natural effluxion of time and I have had landlords who have found that their tenant has packed up and handed keys back on expiry resulting in a costly void period.

This is why we recommend 12 months with a break clause at 6 months, It offers security to the tenant and flexibility to both and reduces possible void periods. Just my two penneth!

11:29 AM, 17th July 2012
About 6 years ago

Bit of advice please Mary; you say a tenant CANNOT legally give notice at the last month of a 6 month tenancy but can just leave on the last day of the AST period even though on most AST agreements it says to give 1 or sometime 2 months notice.
I guess this is more a request than requirement as i presume it would be deemed an unfrair condition. if tenant left on last day of AST.
I would imagine lots of LA would try to retain the deposit.
Could you advise as it fits in with the initial post about AST's
It might be a pedantyic point but I couild see deposit retention occurring and negative references if a tenant did just leave on the AST last day without any notice.

11:31 AM, 17th July 2012
About 6 years ago

This is really great and honest advice. An AST is not worth the paper it is written on (from a landlord's perspective). If your tenant doesn't want to live at your property anymore ... LET THEM GO ... and quickly find a tenant that _does_ want to live at the property instead.

The only people that benefit from legal proceedings are SOLICITORS ... and they are almost disliked as much as Estate Agents ... because they charge a lot of money ... for not delivering a lot of value!

11:41 AM, 17th July 2012
About 6 years ago

Amendment to "
Further, one must remember that whilst a Landlord must serve notice, a tenant isn't obliged to do so" - I was of course referring to ending a fixed term tenancy.

Mary Latham

12:04 PM, 17th July 2012
About 6 years ago

I think Eric has answered this Paul but you make a good point I hear lots of landlords and some Agents who think that a tenant MUST give notice at the end of a fixed term and if they don't that they can withhold deposit to cover the lost rent. A tenant DOES NOT NEED TO GIVE NOTICE AT THE END OF A FIXED TERM AST he can just walk away and this is why good communication is vital to avoid the void. A term in an AST cannot change the law and this is the law.

Mary Latham

12:10 PM, 17th July 2012
About 6 years ago

You make a good point Eric, tenants are becoming more concerned about being moved on every 6 months but I laways tell tenants that I am in this business for the long haul and I show my membership of landlords organisations and accreditation to prove that I am a serious landlord. I explain that if they are good tenants I want them to stay forever - I don't have any problems convincing them because I have ASTs going back so far to prove it. All landlords need to be able to demonstrate that if the tenant is a good tenant it is not in our interest to move them on.

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