Buying tenanted property – can you ‘reset’ the tenancy to ensure it is valid?

Buying tenanted property – can you ‘reset’ the tenancy to ensure it is valid?

10:02 AM, 30th January 2023, About A year ago 33

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Hello, We are considering buying a block of 5 flats, all tenanted. Some have been on-boarded through an agent and others have not.

Our concern is that at least some are not valid tenancies in which prescribed information was not given or deposits protected in the correct way, which could cause us major issues down the track.

If we as new landlords were to create new ASTs and ensure everything was done correctly, or the current vendors were to do this before exchange, could that ‘reset’ the tenancy anew and so any historical missteps would be wiped clean?

If we were to create new ASTs, and the tenants were happy to sign them, if down the track they realised the previous landlords hadn’t protected their deposits properly, but we had, would we still be liable for the previous landlords mistake?

Buying tenanted properties seems awfully risky if so.

Thank you,

Laura


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Comments

Smartermind

12:27 PM, 30th January 2023, About A year ago

Get the seller to indemnify you for their failings or sell the property with vacant possession. If they refuse walk away.

You cannot just reset the tenancy because it suits you.

Kate Mellor

12:39 PM, 30th January 2023, About A year ago

I’m in agreement with Smartermind. Either demand a reduction in the sale price equal to the maximum amount of any claim, (up to three times the deposit amount x no of tenancies affected), or insist that the outgoing landlord indemnify you.
The amount of the penalty is at the discretion of the magistrate (between 1 & 3 x deposit), and as you weren’t physically responsible for the failures, and if you can show that you offered all tenants new leases and rectified everything that was possible to rectify there’s a fair chance you would receive the lesser penalty should you be subject to a claim.

Laura Coleman

13:00 PM, 30th January 2023, About A year ago

Reply to the comment left by Graham Bowcock at 30/01/2023 - 10:49
So if the vendor agreed to offer new ASTs to all tenants and did everything correctly with Prescribed Information / deposits, and the tenants agreed to sign, then would this 'reset' things as it is a new agreed tenancy? I am not only worried about fines for deposits not being protected, but also not being able to service S21 in the future if we needed to.

Graham Bowcock

14:31 PM, 30th January 2023, About A year ago

Reply to the comment left by Laura Coleman at 30/01/2023 - 13:00
I do not believe it is possible to "reset" a tenancy that is already going. If it was, then every landlord would do it. The important issue is pre-commencement compliance that would be a matter of fact - it was either done correctly or it wasn't.

I am not sure what case law there may be - generally these sort of cases do not set precedents. If you were to rely on them you may find that the facts of your case do not support a possession order; if you (your predecessor) has not complied you are always at risk that you cannot get possession.

With my valuer's hat on, I come across a lot of non-compliance and I simply adjust the value to reflect potential difficulities (e.g. no s21, deposits fines, etc.). It becomes mathematical really.

Andrew Wilcock

17:37 PM, 30th January 2023, About A year ago

As previously stated, there is, in my opinion no such thing as a 're-set'. However, both tenant and landlord can agree to, and sign a 'Deed of Surrender' to end the existing AST.As a deed, this must be witnessed. Theoretically, the tenancy is then at an end. ( though normally the property would be vacated and the keys handed back.)
New prescribed information could then be supplied and a new AST could be signed and immediately commenced. HOWEVER, the danger is that, under s.21 Housing Act 1988, this 'new tenancy' may actually be later considered, by a court, to be a 'replacement tenancy'. The fact that the landlords are not the same might carry some weight but a district judge might decide that, at the date of transfer, the incoming landlords took on (and usually this is formalised by 'notice under s.3 LTA 1985 and s.47 & s.48 LTA 1987) the terms, conditions and continuing liabilities of the existing tenancy.
Very tricky situation. I'm not aware of case law on this point. As a previous poster has remarked, if 'faulty' tenancies could be rectified by such a method, why is it not common practice?

Contango

17:39 PM, 30th January 2023, About A year ago

Reply to the comment left by Puzzler at 30/01/2023 - 11:16not correct. An assignment of the reverison (ie one landlord sells to another does not create a new tenancy)

Contango

17:48 PM, 30th January 2023, About A year ago

Ive been in this situation and if I may I will tell you the safest way to resolve :
Exchange contracts subject to a long completion during which time you have the vendor to agree to provide tenant contact details so that you can obtain new gas certificates and EIC report for each flat and get the seller to agree that completion is subject to you obtaining the above prior to completion which you undertake to use best efforts to obtain. Get the seller to refund tenancy deposits before completion - in any event its extremely difficult to transfer protection to buyer. Provided you have done the above you should probably be OK. It sounds like a faff but you cant be too careful - the law is now weighted if these are missing more towards the tenant

Kizzie

18:23 PM, 30th January 2023, About A year ago

The landlord & tenant act applies to long residential leases of over 7 years purchased by the leaseholder for a premium and registered as a deed at the land registry with a registered Title. It doesn’t apply to Assured short hold tenancies.

Graham Bowcock

18:36 PM, 30th January 2023, About A year ago

Reply to the comment left by Kizzie at 30/01/2023 - 18:23
There is a requirement under s48 of the Landlord and Tenant Act 1987 to furnish all tenants of residential property with their address (in England or Wales) where notices can be served.

Graham Bowcock

18:38 PM, 30th January 2023, About A year ago

Reply to the comment left by Trevor Leigh at 30/01/2023 - 17:48
It should be part of the buyer's due diligence to make sure all documents are up to date, but I can't see how this helps if the original tenancy was not set up properly in the first place. You cannot remedy a failure to comply at the outset.

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