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

18:26 PM, 9th October 2012, About 9 years ago

What a bizarre comment.
I understand the sentimentsd and difficultiers of course you have to find someone to take them to Court and then they have to have two pennies to rub together to make it a worthwhile exercise - and not just cost you more money.
But let's be clear on one thing Paul where the Law is concerned. A 12 month AST is a binding contract on both parties unless there is a break clause that can be triggered, or the LL is in breach and thus the tenant can walk away penalty free. Otherwise unless the Landlord has mutually agreed to early release the tenant is tied until a new tenant has started paying the rent.
In fact following an Appeal Court case several years ago involving a firm of solicitors leaving commercial premises early it was held not only that the solsd remained liable for rent to the end of the agreed lease term, but that the LL didn't even need to do anything to mitigate their loss by trying to find new tenants as quickly as possible.
This has always been held to be the position on domestic lets, but informed legal opinion post that case was that the landlord probably did not. So the reverse of what you say is what applies at Law - though on a prctical basis...............

by

19:30 PM, 9th October 2012, About 9 years ago

If the tenancy goes statutory periodic with no material changes to the agreement, PI does not need to be re-issued, and no additional fee is required.
Only if changes are made to the agreement does the deposit need to be
re-registered; which then would involve re-issuing PI and paying another registration fee.

Chris

by Industry Observer

20:24 PM, 9th October 2012, About 9 years ago

Chris
Forgive me but in terms of the Statute (NOT Scheme Rules and Requirements) I cannot see how you are correct. The whole basis of the position in a periodic is not whether the deposit needs re-protecting as often it will not. Indeed if it is with DPS for example then the landlord does not need to do anything as the money stays re-protected automatically.
But that does not mean that the other part of deposit protection, the issuing of PI, can be ignored. The periodic tenancy is clearly a new tenancy (even if the Statute is clumsy or inconvenient in TDP terms). Every new AST post 6.4.12 must have the deposit protected AND PI served. It may be that the protection bit happens almost automatically, or by default, or with minimal effort.
But the PI needs action on the part of the Landlord.
I hate to ask but how senior are you at TDS because I really do not think what you are saying is correct but if you are indeed a senior manager then what you are saying is potentially very significant for landlords and agents (especially if you are wrong and I am right!!). It is in terms of deposit protection in terms of the deposit itself - but not in terms of the need to serve PI. The first part of your final sentence above is correct - but the second part in my view is not.

by Recardo Knights

8:49 AM, 10th October 2012, About 9 years ago

Hi All,
still confused with what seems to be conflicting views. All I want to avoid is paying an anual regestration fee for regestering for a Deposit Protection (with My Deposits app£30) for the same tenant, in the same proprty, Many have now been there 4-5 years.
Example:
Year 1, I do an ASTfor a new tenant,and pay to protect it (with My Deposits), Year 2 I renew the AST for another 12 months, no changes apart from the start and end date. Same tenant. same property, same rent. As no new deposit is taken I do not return it as the tenant is still there. Do I have to do another deposit protection for the deposit already protect in year 1?
If I have to keep paying to protect the original depost on a no change tenancy year after year, BUT can avoid doing so if the tenancy rolled over to a periodic tenancy then I will do so.
I'm sure no one want's to be fined 3 time the rent because of a misunderstanding.
I did read that no deposits taken befor April 2006 did not have to be protected. The tenant in my original post took the tenancy in 2005, that is why it was never protected.
I think I will have to write to My Deposit and see what they say, as I feel tenants still prefere the piece of mind of a renewed12 month contract.
Seems I may have opened a can of worms here!
Regards
Recardo

by

16:09 PM, 10th October 2012, About 9 years ago

Listen old mate I can see you are struggling.
You are making life unecessarily hard for yourself.
Just do 1 initial 6 month tenancy and protect the deposit.
If the AST remains the same for the next 20 years then NO new protection is needed.
For rent increases use the Section 13 process.
Having a 12 month tenancy gives no benefit to you whatsoever.
None of my tenants have EVER objected to have a 6 month AST and then onto a SPT.
If there are any changes to the AST like you moving address or another tenant is added the a new DPC MUST be issued.
I have NEVER had to reprotect a deposit and the tenant would be paying the 'admin charge' if I ever did.
Tenants have stayed for years without any problems.
You MUST phone mydeposits and ask generically about your particular situation; do not give your name and membership no.
The way I would work it; is if I wanted anything changed on the AST, then I would pay the 'admin' charge, except rent increases when the Section 13 process would be used,
Anything the tenant wants to change then they pay the 'admin' charge.
Doing all these 12 month AST's serves NO purpose at all.
As we have discussed a tenant could leave in the 9th month of a 12 month AST and you could do nothing to prevent them doing so.
A 12 month AST with a break clause is effectively you issuing a 6 month AST followed by another 6 month AST as you would have the right to invoke the break clause.
So you see a 12 month AST with a break clause for all practical purposes is NOT a 12 month AST.
Remove the break clause and then YES the AST is a true 12 month tenancy.
You are giving yourself a load of grief for no material or appreciaqble difference in the security of either you or the tenant to maintain the tenancy agreement.
WHY BOTHER doing it your way!!!?

by

21:18 PM, 10th October 2012, About 9 years ago

You are correct all tenancy agreements MUST be complied with.
However what if they are not!?
Are you going to chase a tenant, if you can find them and do a CCJ on them for the remaining term they signed up for and then attempt recovery from them.
NO you won't bother; because it is not worth it!
I say again the ONLY value an AST has of whatever length is to prevent a LL evicting the tenant unless the tenant does NOT comply with the AST terms.

by Industry Observer

21:48 PM, 10th October 2012, About 9 years ago

Recardo
If a new agreement is signed on an AST the deposit must be reprotected (which may mean no action needed at all on that side if it is with DPS) but even if no specific action is needed the Prescribed Information MUST be re-served (even if all the information on the face of it appears identical as compared with the last one served).
Same requirements apply to any existing AST going periodic because they are a NEW TENANCY courtsey s5 of 1988 Housing Act. Even if no terms have changed they are a new tenancy with an indefinite term - periodic. Being a new tenancy triggers the TDP requirements - not other Statutes etc.
By all means don't bother and take the risk until there is a Court of Record decision on whether or not this is correct but do you really want to be the test case?
Protect when you don't need to and not an issue. Don't protect when you should have done and you have an inescapable problem because the offence has been committed.

by

3:46 AM, 11th October 2012, About 9 years ago

No you are wrong a DPC is NOT needed when a original AST is in force.
Deposit regulations consider ANY AST which proceeds onto a SPT is the same AST; NOT a new AST.
A DPC is required everytime there is a change to a AST.
It is NOT possible to change a SPT without issuing a new at least, 6 month AST.
Rent increases may use the Section 13 facility to obviate a new AST.
An SPT is in effect a new tenancy agreement but does NOT require a DPC as it is an extension of the original AST.
Forget Section 5 it does NOT affect deposit regulations, period.
A DPC is required only for an AST change, NOT a SPT because you must issue a new AST if there is to be a change to a SPT.
These maybe pedantic points, bu ther point is you do NOT need a DPC for an SPT

by Industry Observer

9:32 AM, 11th October 2012, About 9 years ago

Paul
You are wrong - but to support your point please quote me chapter and verse in the 2004 Act, LA2011 or any other TDP related Statute which SPECIFICALLY states what you say. As opposed to what I can quote to you the 1988 Act which clearly states a periodic is a new tenancy - obviously a new AST.
The TDP regulations then require appropriate action when any NEW tenancy comes into effect. The starting oint for what needs to be doine is the 1988 Act NOT the 2004 Act, because the 12988 Act (as amended by 1996) dictates what is or is not an AST. If it is an AST then the 2004 Act and all TDP provisions dictate what you must do in those tenancies if there is a deposit taken.
Are you areguing that if there is a no deposit AST and it goes periodic that is then not a new tenancy?
If you can quote me the TDP comments under Statute (NOT Scheme Rules) which state otherwise I will concede. But you will be unable to - because several legal authorities who had previously and originally felt as you do have siubsequently changed their minds.
This is a classic situation of wishing things to be as you'd prefer, and arguably as they should be. But that does not override the Law.
What on earth makes you think that issuing a s13 notice means you do not have, in the periodic state, a new tenancy? You do - what you do not have is a new agreement, but the agreement and the tenancy are two different things. Hence why we can terminater an agreement but not a tenancy.
A DPC is not needed every time there is a CHANGE to an AST it is required every time there is a new AST IF the Scheme Rules require it. But the Statute requires that the protection and PI serving are carried out every time. The only reason protection does not always need to be carried out is if it is ongoing and no action is needed.
I assume you can at least agree that if there is a new DPC needed then PI will also definitely need to be served?

by Recardo Knights

14:13 PM, 11th October 2012, About 9 years ago

Hi Paul & industry,
All AST's I have will now be rolled over to a periodic tenancy. Any new AST's (new tenants) will be for 6 months. If a tenant askes for a new 12 month AST I will OK but you will have to pay the admin fee to cover a new DPC
Thanks to you all who took the time give your advice,
Recardo


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