Buying with tenants in situ with periodic AST

by Readers Question

9:46 AM, 1st March 2016
About 3 years ago

Buying with tenants in situ with periodic AST

Make Text Bigger
Buying with tenants in situ with periodic AST

I’m about to exchange/ complete on a leasehold property which currently has tenants in situ on an AST periodic agreement dated April ’14. The rental is currently managed by a lettings agent. The bond is in a TPS.questions

I understand I’m buying it with the tenants and their current agreement but would like to clarify where I go from here.

So my questions…

1) On 1st April do I just automatically become the new landlord on their current AST agreement? Do I need to give them anything formally? (Except for my contact details and bank payment details)

2) The tenants are currently paying between £100-£150pm below market value.

I need to increase the rent, but am looking to increase it probably £50pm for first 6 months then a further £25pm from then. (I.e I would like to get £75pm more but am trying to do it gently/nicely as they appear to be good tenants)

When can I increase the rent? I assume I need to give them a months notice? I’ve already verbally said I’m looking at possibly an extra £75pm (as they asked when I went round). Obviously they weren’t overjoyed but I think they appreciate they’ve had a good deal for 5+ years.

3) Can I change them onto a fixed term AST? Do I need to give notice to them that the periodic version is ending? They have said (verbally) they’d be happy with a 6 month fixed term agreement.

4) Do I have any obligation to stay with letting management company? I do not believe I have seen the requirement in any legal docs so far.

5) Re the bond. Is that just transferred over to my TPS account? Do I need to get written permission from tenant?

6) When I asked if the bond will remain complete the agent said they couldn’t say as check out hadn’t been completed. How can I ensure that I/tenants  don’t end up with no or a reduced bond being transferred?
(From my inspection of the property I can’t see why any of it would be retained)

7) There is an outstanding maintenance issue. (Small leak which has caused small amount of damage to wall & carpet) is there anyway I can force this being sorted prior to completion? Or ask for the cost to resolve it myself?
I don’t want to delay completion as stamp duty deadline looms but also would like them to sort out the outstanding issue.
(Tenant reported it 18months ago, agent bodged a repair and tenant only re-reported it again last week)

8) The seller doesn’t appear to have complied with the leasehold contract (in that the property needs to be decorated every 5 years and hasn’t been). Have I got any comeback on that? The property does look in good order but obviously should have been decorated as per leasehold agreement.
(The seller won’t officially answer when it was last decorated but the tenants have stated it hasn’t been done since they commenced let 6+ years ago)
To adhere to the agreement I will need to decorate.

9) The estate agent provided us with incorrect ground rent/service chg figures. (On property particulars (paper & internet) and verbally). To the tune of £237. (A small amount of which can be attributed to an increase since property was first listed and details not updated, but the rest is just an omission deliberately or not!)
They’ve acknowledged the error and apologised.
Again do we have any comeback on that?    I assume not.

Is there anything else I should be aware of with the tenant in situ situation?

Thank you for your help

Marsh



Comments

Steve From Leicester

11:17 AM, 1st March 2016
About 3 years ago

With respect Marsh you appear to have a very limited knowledge of the legal aspects of letting. Are you sure you want to do this by yourself?

Perhaps someone on here will be good enough to go into all the details about Section 48 (change of landlord), Section 13 (rent increase), implications about the possible restriction of serving Section 21 due to outstanding repairs and so on, but I'd urge you to consider using a reputable agent. They will take a bite out of the rental income but could be worth many times that amount if something goes wrong.

Gary Nock

19:20 PM, 1st March 2016
About 3 years ago

I agree with Steve. Taking over a property with tenants is not straightforward even for experienced landlords and agents. I recommend one of the landlord foundation courses run by the NLA or RLA. But in the meantime engage a good agent who knows what they are doing. I always get tenants in this situation to complete a whole new tenancy set of paperwork. This includes : Referencing, Deposit Protection, Inventory, How To Rent Booklet, EPC, AST, Gas Cert, Electrical Condition Inspection Report, Legionella Risk Assessment. If you know how all this is done and fits together - fine. If not use an agent until you do.

And if there has been some "confusion" over service charges etc then make sure they are up to date, and that the reserve or sink funds for planned maintainence such as decorating and long term repairs such as tarmaccing drives are healthy. If such work has not been done then funds may not be available. This can be down to greedy freeholders, service charge debtors, poor budgeting - or all of the above. If it's in deficit then you will be asked to foot the bill.

Puzzler

22:22 PM, 1st March 2016
About 3 years ago

Ditto comments above, these are things you should have found out before offering on this property. You can't just buy it and do what you like. If you are buying it because you think you can just put up the rent to whatever you like and you have done your sums on that basis you are very likely to come unstuck. Why don't you want to stay with the letting agent? You need one and unless this one is lacking in some way you might as well use them. Go and talk to them now, they will be able to answer some of your questions.

You do seem to want a lot, most of which I doubt you will get and on the surface nor should you

J C

9:58 AM, 3rd March 2016
About 3 years ago

Hi, I'll try to give easy answers.

1. Issue a section 48 notice to all tenants.
2. Issue a section 13 rent increase form. Please be advised that normally you cannot raise the rent more than once in a 12 month period.
3. You can ask them to sign a new AST but they cannot be forced to do so.
4. You do not have to stay with the letting agent but my advice would be to stay with the current agent or change to a new agent as you don't appear to have sufficient knowledge at this time.
5. Use a letting agent is my advice.
6. Use a letting agent is my advice.
7. Ask for the repair to be completed or a contribution (deduction) towards the repair. 90% chance at this stage that it will delay completion.
8. Caveat Emptor applies when buying any property. But to be a good landlord I would suggest redecoration of common areas regularly.
9. You may have comeback but again all it would do is delay completion at this stage. So you have to weigh up what delayed completion will cost as opposed to disputing all these issues.

To summarise: My advice would be that you employ a letting agent for at least the first 12 months until such time as you can become familiar with the processes involved.

Chris Byways

13:44 PM, 3rd March 2016
About 3 years ago

If issuing a new AST, I believe you will need the RtR checks completed even though tenant is existing.

If the leak was discoverable by a survey, or not known about by seller, prepare to forego that cast.

Negotiate the agent release fees at this stage.

How do you KNOW the rents are low?

Rent increase may only be once in 12m, but that could be advised to apply in two stages?

Good advice above.

Marsh Mallowed

19:58 PM, 3rd March 2016
About 3 years ago

Thank you for taking the time to reply and for the constructive comments.

We are not total novices and have been successfully renting properties out for a number of years. The only time we had problems was when we were badly let down by a letting agent and this has unfortunately somewhat soured our opinion.

We are confident with  Referencing, Deposit Protection, Inventory, How To Rent Booklet, EPC, AST, Gas Cert, Electrical Condition Inspection Report, Legionella Risk Assessment and the principals of R2R, however we have no experience with buying a property with tenants in situ, hence the questions about that specific topic.

We are confident that the rent is low, as the current letting agent, and the valuer have said so, we let a property already in the area, we know prices for that spec in that area and an identical flat directly above has just been let for £150 more than ours is.

There are no issues with the service charges, we have seen 5yrs of accounts and they appear in good order and contain a healthy contingency. The issue arose from the estate agents (who are also the letting agents) advising us of the wrong figure.

We believe the leak issue is now due to be mended.
We will discuss the decorating issue with our solicitor. It is a condition of the leasehold not the tenancy agreement.

We originally planned to issue an AST to commence upon sale completion and from comments it would appear that is in order if they are happy to (which they have stated they are).

I didn't word my bond question correctly. I'm aware that the current agents need permission to transfer the bond. my question should have been 'Do I personally also need to obtain written permission'? I will advise them that it will be transferred unless they object. And will speak with the current agents about them reviewing it early to establish if the tenants will be getting their full bond transferred. I will make the tenants aware of the bond amount and that it may be covered by the current bond being transferred unless any deductions are made on check out.

Thank you again for any help given.


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