No ASTs but Lodgers Agreements on new HMO purchased?

by Readers Question

11:34 AM, 27th March 2015
About 4 years ago

No ASTs but Lodgers Agreements on new HMO purchased?

Make Text Bigger
No ASTs but Lodgers Agreements on new HMO purchased?

I have just completed on my fourth HMO. It comes complete with six tenants all professionals and all paying rent happily. However, no ASTs , only a “Lodger’s Agreement” which is a single sheet of A4, and explicitly states on it that no tenancy has been formed by this document.

I am not sure if this is a good or a bad thing. I have ASTs for each and every other room in all my other HMOs and standalone properties. The Lodgers agreement allows for a months’ notice either side, but presumably confers no right of abode on the “tenant” …?

All comments welcome

Ianlodger



Comments

Neil Patterson

11:37 AM, 27th March 2015
About 4 years ago

Hi Ian,

I assume from your question that you did not discuss this with your solicitor when you purchased as I am quite surprised they did not bring it up with you.

Ian Simpson

11:51 AM, 27th March 2015
About 4 years ago

Reply to the comment left by "Neil Patterson" at "27/03/2015 - 11:37":

Nope, no particular comments from solicitors. I was thinking of getting all the current tenents to change to NLA ASTs for good measure, but would like to hear what members of this forum think of the idea, as it will involve some hassle obviously....

Tessa Shepperson

11:53 AM, 27th March 2015
About 4 years ago

The agreement may SAY it is a lodger agreement and not an AST, but if the facts and circumstances of the letting are a tenancy, then it will be a tenancy.

See the case of Street v. Mountford, House of Lords 1985.

In any event it cannot be a lodger situation (as this is generally understood - 'lodger' is not a legal term) if the landlord is not resident at the property.

Paul Franklin

14:37 PM, 27th March 2015
About 4 years ago

It's probably in your interests to get them to sign the NLAs AST because as Tessa says, they already have an AST whether you like it or not no matter what's written down.

This means that you would have to go through exactly the same process as normal to evict them etc as required for all your other ASTs in your HMOs (no giving 1 months notice wouldn't be lawful) yet all the terms you have that cover your back in your standard AST aren't in force either.

So as I see it, as it currently stands you have the worst of both worlds - you are bound by the statut concerning ASTs but none of your own terms set out in your ASTs will be enforceable as they tenants haven't singed up to them - they've only signed up to what's written on the A4 agreement, which might not even be enforceable - certainly the 'important bits' won't be.

Robert Mellors

16:05 PM, 27th March 2015
About 4 years ago

Although I use licence agreements in my HMOs, this is not a straighforward process and simply calling something a licence (or lodger licence) does not make it such, and from your description of the situation I would agree with the other comments that what you have purporting to be a lodger licence agreement is definitely not a lodger agreement (as you don't live in the same property), and is highly unlikely to be a licence agreement. The agreements would almost invariably be interpreted by a court as ASTs. As such, like Paul says, you have a bad case scenario as you have an AST but one that does not contain all the terms and conditions that you would normally include for your own legal protection.

Ian Simpson

17:00 PM, 27th March 2015
About 4 years ago

Thanks all... I think I will get six ASTs prepared and get them to all sign up as soon as we get completion...

Jo Leverett

10:52 AM, 28th March 2015
About 4 years ago

Advice please? Looking at buying 14 bed ex guesthouse in Great Yarmouth. Could I let this out using Holiday Let type agreement and avoid HMO license, to rent to professional local workers? Also, the rooms won't be self contained other than with microwave, fridge, kettle and ensuites, this won't therefore be enough to classify as 'self contained'? Looking for cashflow, is this route a can of worms?
If anyone can help, please let me know.

Robert Mellors

11:53 AM, 28th March 2015
About 4 years ago

Reply to the comment left by "Jo Leverett" at "28/03/2015 - 10:52":

Why do you need to avoid the HMO licence? As a guest house it should be up to the HMO standards anyway, and the cost of the HMO licence itself spread over 14 letting rooms will be minimal.

Mark Alexander

12:44 PM, 28th March 2015
About 4 years ago

Hi Ian

I agree with the points made above, Tessa's in particular.

There may be some hope for you though, especially where the tenants have been in situ for more than 6 months already. Given that the existing tenancies are AST's according to case law (i.e. regardless of what the paperwork says) this means that if they have already run for six months there is no minimum term on future tenancies. Therefore, you don't have to issue new 6 month AST's, you could issue 1 month AST's, but ONLY if the tenants have already been there for 6 months or more. Of course they are not compelled to agree to such an offer but if they do accept then the basis of their new tenancies will be statutory periodic after just one month. Remember to re-protect the deposits if you do issue new AST's and also remember to re-serve prescribed information when they revert to statutory periodic tenancies.

I hope you managed to get a good discount on this property!
.

Mark Alexander

12:46 PM, 28th March 2015
About 4 years ago

Reply to the comment left by "Jo Leverett" at "28/03/2015 - 10:52":

Yes it's a can of worms for the reasons that Robert Mellors has outlined.

However, it may be a very profitable can of worms and therefore well worth opening. I don't have sufficient information to comment further on that though.
.

1 2

Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

Shelter's website says Section 21 does not cause homelessness

The Landlords Union

Become a Member, it's FREE

Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agents

Learn More