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

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

9:26 AM, 17th July 2012, About 10 years ago 90

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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

by

13:07 PM, 17th July 2012, About 10 years ago

Thanks Mark - invoice to follow. Good suggestion 😉

by Mark Alexander

13:25 PM, 17th July 2012, About 10 years ago

No worries, I'll offset against my far bigger invoice for the endorsement LOL

by Mark Alexander

13:28 PM, 17th July 2012, About 10 years ago

Hi Paul, given your love of Rental Guarantee Insurance I'm shocked by your comments above. Try claiming on your RGI without an AST! If you have an AST and RGI and your tenant moves out at month four refusing to pay until the end of the tenancy you are covered are you not?

by

13:31 PM, 17th July 2012, About 10 years ago

Rgarding an AST worth I do agree with you about the obligations being noted for a tenant to comply with .
That is fair enough; but as a way of forcing a tenant to stay it is useless.
They will go and suffer a bad reference and loss of deposit unless they come to a mutual agreement with the LL.
With good references etc being so important now the prevalence of this occurring should be rare.
Much prefer a 6 month AST as I might want to get rid of a tenant and some of these break clause AST's can be problematic.
So I KISS the whole situation
6 month AST then onto SPT unless tenant wishes and I permit another 6 month AST subject to tenant paying the admin fee for a new DPC.
Of course one hopes to have a good relationship with the tenant so that hopefully they do give notive advice.
I have NEVER hasd a tenant just leave, they have always given notice; but perhaps I have just been lucky in that situation.

by

17:00 PM, 17th July 2012, About 10 years ago

As Mary says - statute overrides contract. A fixed term is just that. Yes, the Law requires a Landlord to serve notice that he requires possession after the last day of the tenancy under S21 of the 1988 Housing Act - but not a tenant. Any claim for a deduction from the deposit would be difficult to enforce. I would also say that break clauses are seldom problematic if drafted correctly and provided that are balanced. Likewise, a tenant receiving a bad reference when they are acting in compliance of the Law may have a claim against the Landlord. I hear many Landlords say "I haven't had a problem in the last 20 years..." but Laws change as do case authorities from recent judgements which often has a material effect on that which we previously assumed. In the words of Hippocrates, prevention is better than cure. We deal with 1000's of tenancies without issue - its only when it goes wrong documentation is tested - and this rarely happens with a good tenant.

by Mary Latham

17:06 PM, 17th July 2012, About 10 years ago

You are right Eric so many landlords have been getting away with doing things that they do not realise are unlawful - now that tenants are becoming educated through internet discussions like this one, landlords are getting into trouble. I guess I just said that it is our fault hahahahahaha

by

17:35 PM, 17th July 2012, About 10 years ago

I go for 6 months initial period.
If the tenant is good, then I let it roll over into a Statutory Periodic Tenancy: this gives both me and the tenant maximum flexibility. Alternatively I will enter into another fixed-term tenancy if that is what the tenant wants, with a set-up charge for the new agreement (but I explain the pros and cons of the two approaches to the tenant).
if the tenant is not to my liking, then I terminate after 6 months.
I tried making all tenancies start on 1st of the month, but that became a pain both for me (voids between tenancies) and tenants (who don't want to pay for a large part of a month they cannot use when their current tenancy expires sometime toward the beginning/middle of the month.
I now choose a day in the month that suits us both and make rent due on that day.
Making the rent-due correspond with the tenancy date means the issue of pro-rata at start or end of the tenancy is avoided.
Note that notice given either by you or by the tenant should end on the last day of a rent-period (the day before the aniversary of the start of the tenancy). This also avoids pro-rata calculations.
To answer your qestion specifically, yes 1st of month dates would solve your pro-rata problems, but might make it harder to find new tenants.

by

20:35 PM, 17th July 2012, About 10 years ago

-> "Likewise, a tenant receiving a bad reference when they are acting in compliance of the Law may have a claim against the Landlord."

If the reference just said that the tenant left at the end of the fixed term without giving any notice, so causing the landlord a long void, I don’t see how a talent could complain, as it is just a statement of the facts leaving the next possible landlord to decide if it is acceptable behaviour on the tenants’ part. The landlord can also say it is unlikely that they would rent to the talent again without giving a reason, as once again it is a statement of the facts.

by

20:37 PM, 17th July 2012, About 10 years ago

All the RGI I have seen don’t cover you once the tenant has left regardless of any fixed terms.

by

21:22 PM, 17th July 2012, About 10 years ago

"so causing a long void" is not a statement of fact and unfair as why would a landlord assume they would be staying after then end of a contractual fixed term? The Landlord should assume that they would leave and the tenant could not reasonably foresee the length of any void period - and why would it be their concern? Respectfully, if you rent a property for 6 months, why would you expect more? If you go on holiday and take a room for 2 weeks, you leave. Its not your fault if there are no further bookings.


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