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

15:31 PM, 11th October 2012, About 9 years ago

Remember you should advise the tenant at the outset of a tenancy that you will pesume they will proceed onto a SPT once the 6 month one has expired.
I believe it is necessary to formalise the process when converting to a SPT.
a letter may be sufficient; but other more knowledgeable people than me may be able to give both of us advice as to what one should do when one reaches the SPT process.
I think in the past I have just issued a confirmatory letter that I will not be enforcing the Section 21 which I always issue 3 months into the AST and that the tenancy will proceed onto the SPT and that the notice period has changed.
I don't know if there is a fomal legal template one should use in these circumstances.
Lets see if we get some responses from other LL who might know better etc.

by

15:45 PM, 11th October 2012, About 9 years ago

I comply with the deposit regulations and as such I don't care what the law sayss; it is what the deposit regultions require and I can assure you that there is NO need to issue new PI or a DPC when the tenancy procedds onto a SPY.
Your legal points may well be correct, how the deposit takers take NO notice of this.
I will therefore follow what the deposit regualtions require.EVERY single LA ansd LL would be in breach of deposit regultaions if you wish to extrapolate from your legal points.
That means no Section 21 can ever be used until any deposit taken is returned and 1/2 million LL could be sued for 3 times the deposit and the original deposit amount.
So I don't think that ALL those LL are in breach of the deposit regulations.
Otherewise LL could be ruined and the lettings industry destroyed.
So I don't think we have anything to worry about as I am right which I confirmed with mydeposits.

by Industry Observer

16:49 PM, 11th October 2012, About 9 years ago

Paul and Recardo
Periodic is an automatic process in any tenancy type, it just happens which is what makes it such a marvellous system.
However most agents would formally confirm to a tenant in writing as Paul does that their tenancy had now gone periodic and, on my understanding, issue the necessary PI along with that letter!! But certainly spelling out the revised notice requirements to comply with a period of the tenancy is a very good isea.
In theory you do not need to 'formalise' a periodic in any way, but it is best practice and definitely it keeps it neater to do so. I would recommend private Lls do the same.
In terms of the s21 and simply issuing it as a matter of course, either soon after commencement which may agents still do, or after three months as a safety play and "just in case" it is needed, I would suggest caution. The legal protocol is that notices should not be thrown around like confetti but only issued as and when it is believed they will be acted upon. Though there is no expiry time limit for usage on a matured s21 of course.
Paul I have consulted someone far wiser than me on the periodic and PI issuing need and whilst there have as yet been no Court cases on this it remains the case that until there are - and sooner or later there will be - the safest play post LA 2011 and with the loss of any offence escape route for landlords is to issue a fresh PI even if the data is the same and even if no specific re-protecting action is needed in terms of the actual deposit monies themselves.
As I said issue when you don't need to and you are 100% safe. Don't issue and it turns out that you should have done and you are 100% unsafe!!

by Industry Observer

18:57 PM, 11th October 2012, About 9 years ago

Paul
I totally do not understand your last point above re s21. All I am saying is that the wisest course is not to issue a s21 until it is actually known to be needed. Where does having to return the deposit come into it? That only applies if the deposit has not been protected to the Court's satisfaction.
I have seen much comment about getting advice from the various schemes. In my experience half the time they don't fully understand the implications of their own rules (especially TDS whose rules potentially penalise their own members) and they will not give any advice an any matter that is legally related.
Hell I once couldn't even get TDS to confirm an opinion on one of their own Rules, never mind Statute!!
We'll see who is right when a case eventually proceeds to a Court of Record, which it will sooner or later. I hope you are right - as if you are not, and the LL losing that case should have issued a fresh PI on a periodic but didn't, then indeed 1/2 million Landlords will indeed have sleepless nights as their error will be too late to correct.
Which it is so easy to do - so why are you so opposed to the safest play in a situation which is by no meamns as clear cut as you seem to think. I asked before and I ask again:-
Please quote me the STATUTORY chapter and verse which states specifically that the clear statements in HA1988 about a periodic being a new tenancy and in HA 2007 and LA2011 about a new tenancy being a protectable incident and thus reprotection and new PI being needed are overruled by what you can quote me.
The only safe route at the moment is to issue fresh PI until a Court has confirmed you do not need to. There are many legal brains far better than mine (and of the three Schemes) that are of the opinion that on going periodic as the Statute wording currently stands, a fresh PI should be issued.
You do as you wish but saying you don't care what the Law says is a bit risky, as that outweighs any Scheme's opinion for what that is worth.
Over and out on this subject

by

20:02 PM, 11th October 2012, About 9 years ago

Yes I see what you are saying but I phoned mydeposits and they confirmed what I thought; no PI needed when proceeding onto a SPT; but as you suggest some form of written confirmation as to the new SPT conditions is good practice and obviously at the same time you could generate a new PI without a DPC.
It is NOT required but as you say what have you to lose.
The only issue I suggest which makes such serving of superfluous paperework is when a RGI claim is being made.
The RGI company and their solicitiors want all sorts of confirmation of documentation being received.
So maybe do what you suggest but require the tenant to return a receipt that acknowledges they have received that documentation.
Just in case your legal concerns arise.
As far as Section 21 goes, never trust a tenant.
You could issue the the S 21 the last 2 months of the fixed period tenancy with an explanation that you don't wish to enforce; but that the order is there to immediately apply for a PO wiith no further notice required.
I just do it mid way theough the fixed period for ease.
Then I definitely know I have served in enough time.
All my tenants have appreciated the situation and they have not expressed outwardly ANY concern over such S 21 issue.

by Kerry Hayward

10:19 AM, 18th October 2012, About 9 years ago

The DPS tell me that new paperwork needs to be issued only when the deposit amount changes. Not for a new AST even with rent increase or when rolling over to periodic.

by Industry Observer

10:40 AM, 18th October 2012, About 9 years ago

Did you get this in writing from them - as if it ends up in Court I am afraid saying DPS told you that you didn't need to comply with the Law will be no defence for breaking it even if DPS said it!!
Was it Kevin Firth or Daren King at DPS who told you this?
Have they had it in writing themselves from CLG (answer will be NO).
I checked with one of the leading L&T expert solicitors in the UK earlier this week what his current view was on what needed to happen when an AST went periodic. His position is that post Localism Act 2011 EVERY deposit on an AST needs protecting or reprotecting at all times. That is as according to the Statute, not what CLG or any TDP Scheme, TPO, ARLA, RICS, me, you or Uncle Tom Cobbly's opinion might be!!! They all count for nought
Up to you what you do but until there is a decision in a Court of Record - which there will be - why take the risk? Because if that decision is that on a tenancy becoming periodic as well as obviously if a new written agreement is concluded (making both NEW tenancies) that any deposit must be protected/re-protected. This includes issuing fresh PI information if you have not been doing so then courtesy of that Court decision you will, to use a legal phrase, be stuffed!!
The problem with asking any Scheme is that they will only answer the question you ask them, which presumably is "Do I need to reprotect the deposit" etc. Now to keep the money safe the answer may well be NO, or "just amend the end date" (though how you do that on a periodic with no end date is a good question) and that is the question they will be answering.
I'll bet good money apogee that neither you nor anyone else in this thread who has runbg any Scheme actually asked them if you needed to re-serve the PI information. The Schemes couldn't care less about that aspect, all they are concerned about is holding or insuring the money and issuin certificates to that effect.
In practice in effect meaning doing half the job - or allowing you to.

by Kerry Hayward

10:09 AM, 19th October 2012, About 9 years ago

Thankyou for your passionate reply Industry Observer! I believe you are right and as you say, until proven otherwise with a court decision then better safe than sorry.

by Kerry Hayward

11:12 AM, 19th October 2012, About 9 years ago

Thankyou for your pasionate reply Industry Observer! I believe you are right and as you say, until a court decision then better safe than sorry.

by Industry Observer

12:13 PM, 19th October 2012, About 9 years ago

Hi apogee
I may be wrong - but I don't think so and more to the point neither do several far better legal brains and authorities than mine!!
My job as a consultant as I see it is to prevent problems and keep my clients out of Court, not help them when they end up there (though I would of course!!).
It may be overkill and it may prove not to bbe necessary - but protecting and serving PI if you ended up not having needed to is a far better position to be in than not having so acted if it turns out you should have done. Localism Act has dictated that, hence why this periodic business now matters. because if wrong there is no escape, previously there was so it was an interesting almost academic legal debate but in reality had no application.
Now it might well do!!

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