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 Industry Observer

17:33 PM, 18th July 2012, About 10 years ago

100% as if it had been two things

1. The whole industry would have heard about it - referrals to the OFT on this issue were very
popular about 10 years ago

2. The OFT would have stopped opposing it if a Court of Record had decided in favour of the
Landlord

Analogy poor I agree - but then I was only following Mary's lead and then got flattened by a juggernaut!!

by

9:36 AM, 19th July 2012, About 10 years ago

Rent Guarantee Insurance, sorry for using an acronym, lazy on my part.
RGI is a method by which a LL may protect themselves against a tenant not paying rent and then the costs involved in evicting them.
It should not be used as a replacement for the normal and usual thorough referencing and enquiries to be carried out by a LL on a propspective tenant. Mark offers detaiied advicein his posts on the whole issues of renting.
RGI should be used a potentially very useful adjunct to normal DD on tenants.
It is incredibly cheap.
discountlettings who I use charge £99 for £50000 of cover including legal costs to ultimately evict the tenant.
This means it could take in my case 4 years to get rid of the tenant and I would still be paid my rent by the RGI company.
This is an annual charge and even if a tenant's domestic circumstances change which mean they would not pass a RGI check if it was carried out again, all you have renew the policy with no further checking required.
This is especially useful if a tenant who passed a RGI check and then finds themselves on benefit will still qualify for the RGI policy providing they still meet the usual monthly rent payment.
You have up to 90 days to submit a claim so that tenants have about 88 doys to ensure that all arrears etc are paid therby preventing a RGI claim being made.
Once a RGI claim is made you have to evict the tenant as they would no longer qualify for RGI.
You could of course retain them but then you are exposed to the risk ot them not passing on LHA to you and then you face the costs of evicting them.
Of course that is your risk to choose.
Personally I prefer to take on only tenants who pass RGI checks.
However fo the cost of £8.25 per month for the year that is cheap for the cover provided.
Even if the RGI policy doesn't pay out for whatever reason, what is the loss compared to the posibility it may well pay out.
I would take the risk of losing £99 for the sake of the policy probably paying out if ever needed.
If you do have to claim you might stike lucky and the policy pays out
For LL who have lots of money and properties they can probably self-insure
Us newbie and little LL CANNOT afford to take suks, so RGI is the last defence you have against a tenant not paying rent.
There are other companies offering RGI.
Apparently there is a company up north whch for about £300 is offering RGI on LHA claimants.
Average annual premium is about £300

by

11:59 AM, 19th July 2012, About 10 years ago

Hi IO - nice to have a mention! I think the issue is becoming a little confused. My opinion was expressly in consideration of 1988 HA. I accept that contact Law allows a remedy where the tenant breaches an express agreement to give notice - the issue is in trying to remedy it and in so doing demonstrate material loss. I am sure that a Court will have heard this - but any authority will apply to a breach of a contractual term rather than impact upon the principles established in the act. Regards

EW

by

12:26 PM, 19th July 2012, About 10 years ago

Hi Paul, Many thanks again for your detailed response, certainly worth consideration. Cheers Don.

by

12:29 PM, 19th July 2012, About 10 years ago

@Puzzler. May I humbly suggest that your agent isn't doing as great a job for you as you think, for 2 reasons. Setting the rent collection date on a different date to the tenancy date just creates a needles grey area regarding ending a tenancy. It confuses Tenant's, in particular, and I have often seen it lead to legal notices being served incorrectly. It also means your agent is compressing all their possible arrears response into the 1st week of each month. This means that they are likely to respond less quickly and efficiently than they would if the workload was spread more evenly throughout the month. 2nd - your agent automatically creates a void of 10 days for you between every tenancy?! have you sat down & worked out how much this is costing you? Surely you are paying them to ensure that tenancies are managed properly so this doesn't have to happen? I bet they love you because you make their life really easy by allowing this, but are they really helping you earn the best return on your investment? It doesn't sound like it to me.

by

17:56 PM, 19th July 2012, About 10 years ago

Missed the bit about the RLA.
I would say as a newbie it would be worth it if only for a bit of handholding.
Having said that I reckon I have learnt far more than when I was a member of the NLA just by participating in this and a few other forums.
The amount of information that is available and imparted is quite astounding.
It is also extremely valuable info in that taking note of it could save one a fortune in losses.
As an example had I come across Mark's site 5 years ago if it was available I would have saved hundreds of thousands of pounds!!!!
Yes that's right.
In the LL game things seem to change at a frightening pace with invarably negative effects on LL.
Knowledge is power and all that, so I think this forum and similar like, property tribes are an excellent way of keeping abreast of issues that affect us.
Literally hot off the press items hit this forum very quickly, largely inspired by Mark who certainly seems to know the 'movers and shakers' in the industry.
As LL who are wishing to protect our interests we surely should be duty bound to be as informed as possible, after all it's our money we are looking after.!!!
So NLA, RLA are ok but I reckon forums are more up todate.
Personally it would be better if there was onl 1 LL association as this would have far more clout with government and would be something that all LL would see as worthwhile joining.
I let my NLA membership lapse as I think I can obtain everything on the net for free.
That has proven the case todate.

by Puzzler

21:40 PM, 19th July 2012, About 10 years ago

In reply - the tenant gives 30 days notice, simples. If they prefer to have all the rents at one time, it is no skin off my nose. It also means that they can concentrate on any arrears for the rest of the month as they will know when they have occurred without constantly checking against every property on their books. I would say that is more efficient not less. I have had very few (in fact no) arrears in over 12 years with ten properties, one short void and mostly long tenancies (up to 7 years and running) so it doesn't really arise. The 10 days is not set in stone allows for inspection, remediation, cleaning, references, assessment and return of deposit (including any dispute) etc. I do pay them to manage properly which means I also want and have happy tenants for whom I provide a service; I'm in it for a business but the tenants are my clients and I prefer to know that the law and good practice is complied with. Cutting corners does not pay in the long run and you would struggle to do the above properly in less time even if you had a fully referenced tenant by the time the previous one vacated and there were no queries regarding the deposit.

by Recardo Knights

10:30 AM, 3rd October 2012, About 9 years ago

A question for Mark and Paul, Everything is in favout of the tenant as the bad old landlord takes the risksb but finds it difficult to remove bad tenants.
I have a tenant that renewed her AST every year for 5 years. She recently signed a new AST 2 months ago for 12 months period, and has just text me to say she need a larger place and would like to give me 4 weeks notice to leave!
How would you recomend I proceed? I asked her if she read and understood the terms of the contract she signed.

by Mark Alexander

10:53 AM, 3rd October 2012, About 9 years ago

This is a tricky one, especially if she's been a good tenant. I'd suggest a face to face visit every time to discuss awkward situations like this, the sooner the better. I would explain that she has signed a commitment to rent the property for another 10 months and that I am reliant on that income. I would, however, agree to release her from that liability when I can find another tenant subject to her paying for the costs of re-letting.

by

10:58 AM, 3rd October 2012, About 9 years ago

There is nothing you can do to prevent a tenant from leaving and effectively breaking her AST agreement.
Basically all an AST does is prevent a LL evicting a tenant within certain legal parameters.
LL delude themselves if they think it means a tenant will stay for as long as the fixed term lasts.
You could try and trace her and take her to court for the remainder of the AST term.
Chances of; ZERO.
Best thing you can do is start advertising for free on makeurmove.co.uk or any of the other online letting agents which charge a liitle.
Use London Private Rentals aswell which is completely free and ONLY available to PRIVATE LL.
NO tenant need ever comply with the length of a tenancy.
So why LL seem to think that a years AST means they have to stay for a year , beats me.
All you need is a 6 month initial AST and then ALWAYS proceed onto a SPT.
Use Section 13 for rent increases as it saves having to issue another DPC.
I do not know of any LL that has successfully sued a tenant for NOT completing an AST.
I suppose you could try for a CCJ for the unpaid rent for the remaining term of an AST but I doubt you would be successful.
You have to find the tenant first to serve notice.
It is just one of those things.
So get over it as there are loads of tenants out there.
I have been in a similar position as you and just let them surrender early and I found new tenants.
Joys of being a LL......................................NOT!!!!?


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