AST Clauses, Holding Deposits and Affordability Checks

AST Clauses, Holding Deposits and Affordability Checks

16:57 PM, 5th March 2014, About 10 years ago 61

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Hi All,

I’ve been getting the paperwork ready for a BTL property that I’m close to completing on. There’s three things that I’m not 100% sure about and was hoping for some advice on. They’re all unrelated, so apologies if I should be raising these under separate discussions…

(1) Adding clauses to an AST
I’m aware that you have to be VERY careful with ASTs. I’m using a NLA template but am wanting to add the following two items under the tenants obligations:

“Not to light any fires in the Property. Fireplaces in the Property have been retained as decorative features and are no longer suitable for open fires or fuel burning appliances.” AST Clauses Holding Deposits and Affordability Checks

and

“To have the use of all appliances in the property, as laid out in the Inventory save those which are noted as not working. However, should any items require repair, or be beyond repair, the Landlord does not undertake to pay for any costs to repair or to replace the appliance, except those which the Landlord is required by law to maintain.

Do these clauses sound reasonable? The first one is entirely my own concoction, so if anyone has any better ideas or thinks it is unnecessary, please tell me. I was just wanting to cover myself in case the tenant causes damage and claims never to have been aware that he couldn’t use the fireplaces. I was going to add something similar to the general notes in the inventory, and of course tell them in person.

The second one I wanted to add in case I end up with ‘heavy handed’ tenants. I’m happy to fix or replace one or two white goods a year, but don’t particularly want to be liable for replacing the entire lot!

(2) How much to charge for a holding deposit
I know there’s been some good discussion about holding deposits on this site already, but I don’t remember anyone saying how much they should be. I’ve read somewhere that ‘about a weeks rent’ should be asked for as a holding deposit, which seems reasonable. However, I’ve also read that up to ‘half a months rent’ can be asked for, which, although it would deter tenants pulling out at the last minute (which might end up costing the landlord several weeks rent), does seem rather steep. If asked for at all, what are other landlords asking for as a holding deposit?

(3) Affordability checks
Do people think that the standard referencing check of income being at least 2.5 x rent is enough? If the tenant is losing say 20% of their income to tax, that means half of their net income would go on rent. After council tax and utilities, not to mention any debts or other financial commitments they might have, many are going to be broke. It’s no wonder rent arrears are such a problem. Mortgage lenders require incomes to be 4 to 5 x mortgage, so a rental affordability check of 2.5 x rent seems rather low. Does anyone impose their own, more stringent criteria, such as 3 x rent? Or would this be too restrictive…?

Any advice or comments to any of these queries/topics would be most welcome and appreciated.

Simon


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Comments

Mark Alexander - Founder of Property118

18:15 PM, 6th March 2014, About 10 years ago

Simon Coppen

18:17 PM, 6th March 2014, About 10 years ago

Has a case ever gone to court where the tenant has argued his holding deposit should have been treated as the 'protectable' Deposit?

I can't see why you couldn't keep a holding deposit for 6 weeks (unlikely you'd be getting one that early before a start date...) and then, when the tenancy starts, give it back and take 'the' deposit and just protect that. All the government and tenancy deposit scheme websites clearly state that a "holding deposit" does not need protecting. I can't quite understand why there is so much paranioa about them, as long as the receipt for them is clear...

Industry Observer

19:48 PM, 6th March 2014, About 10 years ago

Don't know Simon lower court cases rarely get reported, but would you like to be the test case?!!!

The schemes and CLG are not Judges Simon that is why - remember the schemes also thought you didn't need to re-issue PI on a periodic.

Finally you are quite right and this is what Lawrence Greenberg recommended years ago - hand the money back, physically, then start all over again.

Joe Bloggs

8:25 AM, 7th March 2014, About 10 years ago

Reply to the comment left by "Yvette Newbury " at "06/03/2014 - 14:34":

the other prob with second hand appliances is they may contain cockroaches (they espec like the heat at back of fridge/freezers).

Fed Up Landlord

10:29 AM, 8th March 2014, About 10 years ago

Re appliance clauses. Personally do not like them. I do not like appliances either! PAT testing and the like. But my friend who has some fridges and washers etc insists on a clause in his about not repairing or replacing. Which puts the tenant in the position of replacing or repairing the item at their expense. With some tenants at end of tenancy this can encourage them to give notice so they don't have to spend £200 plus on a new washer or fridge. Yes I know that it costs them a lot more if they move but when we are talking tenants sometimes logic goes out the window. I also use the NLA template and insert a clause similar to the one subject of this post. I also add a clause that if the tenant replaces an item then at the end of the tenancy they have the option of taking it with them or negotiating a price with the landlord for it to be left in the property. But personally for the cost of replacing a basic cooker, fridge, or washer it's worth it to help keep the tenant and "avoid a void". Hey that sounds like a good name for a website Mark. http://www.avoidavoid.com!

Romain Garcin

11:45 AM, 8th March 2014, About 10 years ago

Reply to the comment left by "Gary Nock" at "08/03/2014 - 10:29":

Note that the tenant is not obliged to replace an appliance. If they do, the new appliance is theirs and they are obviously free to take it away with them.

As such the end result of having a clause that you will not replace appliances is that the property will have no appliances left at some point and you will then have to decide again whether to buy new ones.

Fed Up Landlord

12:47 PM, 8th March 2014, About 10 years ago

And then Romain it comes down to personal preferences as a landlord and your business model. Some landlords prefer installed white goods as it may help clinch the let and get a higher rental. Some landlords with budget entry properties let unfurnished as it enables them to compete at that level and reduces maintainence costs as leaks etc from washers become the tenants problem and not the landlords. I am not wholly convinced that white goods substantially increases overall rents anyway.

Yvette Newbury

14:40 PM, 8th March 2014, About 10 years ago

Reply to the comment left by "Gary Nock" at "08/03/2014 - 12:47":

" leaks etc from washers become the tenants problem and not the landlords" - it's great seeing everyone's viewpoint on this forum. This would be a nightmare in my leasehold flats - try telling the person downstairs who is being flooded by washing machine water that the machine belongs to the tenant and not me and therefore it is "not my problem".

Fed Up Landlord

14:58 PM, 8th March 2014, About 10 years ago

Yvette theres a difference between a minor leak on a fitting which tenants call you out for, and a full blown flood! I too have flats and have been on both ends of a leak. If its the tenants machine and it leaks I expect a contribution from them towards putting it right. As a matter of professional courtesy I always put the flat right underneath within a few days. And if it is the tenants fault they know it is and so does the flat underneath!

Yvette Newbury

15:10 PM, 8th March 2014, About 10 years ago

Yes, I am sure you would do, as would I. But we both know that some landlords don't quite see it like that.

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