Excellent tenant wants a 20% rent reduction?

by Readers Question

10:27 AM, 17th November 2020
About 2 weeks ago

Excellent tenant wants a 20% rent reduction?

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Excellent tenant wants a 20% rent reduction?

I have an excellent tenant who pays £1500 every month. With 2 months left on the contract, I asked for his intention on renewal. He said he would renew, but only at £1200 per month.

I said I would do some research and let him know. Two letting agents say ‘no’ as houses are renting very quickly and demand is outstripping supply so if anything you should increase your rent.

However, the agents obviously want their fee plus I may have a void period. So say £2000 down, but could renew with existing tenants for £1400 showing a reduction, but only £1200 down on the year and no hassle over the deposit what would you recommend.

Many thanks

Peter


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Comments

Ian Cognito

14:48 PM, 18th November 2020
About 2 weeks ago

Have you asked your tenant on what basis he feels a 20% reduction is justified? You should be aiming to get market rate less x% from a good tenant.

What is x? Open to debate, but I'd suggest around 5%. Maybe even up to 10%.

Remember that, ignoring other costs and the risk associated with letting to a new tenant, a 1 month void = 8.3% loss of annual rent.

AMAZONIA STARBUCK

19:00 PM, 19th November 2020
About 2 weeks ago

Reply to the comment left by at 18/11/2020 - 09:58
There might have been a wee hint of sarcasm in that comment!

Monty Bodkin

23:43 PM, 19th November 2020
About 2 weeks ago

"I have an excellent tenant who pays £1500 every month. With 2 months left on the contract, I asked for his intention on renewal. He said he would renew, but only at £1200 per month."
Then they are not "excellent tenants".

AP

8:17 AM, 21st November 2020
About 2 weeks ago

As others have said, different areas of the country have been affected differently so that is crucial to understanding your position.

Since March, I’ve had three tenants ask for reductions (two at renewal and one before).

The tenants have always paid on time and been ‘good’ tenants. In all cases I explained my costs were still the same so could they please let me know why they had requested the reduction.

The first one (during the initial lockdown) said rents and demand had fallen so that’s what they thought it should rent for. I spoke to agents who said it was a very uncertain time but the requested reduction of 20% was too much. So we agreed that she would move. I had to reduce the rent by just under 5%, have a 3 week void, pay agents and some furnishings costs. But that is still much less than the other tenant was asking. But I’m closer to my usual rent and it’s going to be easier to bring it back up.

In another property, the tenants just sadly could no longer afford the flat due to job losses. They needed a 25% rent reduction for an unspecified amount of time. I wanted to help but this was too much for me to be able to afford and too much risk. We got on well so I agreed to release them early from the contract and they luckily understood my position and wouldn’t take advantage of it like others might. They moved to a much cheaper area. I let the flat at around 6.5% rent reduction, plus increased agents costs with a week void.

In the last property, the tenants had been there for several years. Their requested reduction to be honest was a bit spurious (worried about self employment for one of the couple) and I knew the flat would let quickly. I offered a reduction back to what they originally paid when they moved in (and in line with the lowest I thought I’d get if I had re-let it quickly - I of course may have got more...) but I saved on agents costs and delayed the decorating I would need to do to re-let.

Another thing to think about is your mortgage. Some lenders ask for an annual updated rent roll and if you are letting at a reduced rate that is below their calculations (say 120% of rent at 5% interest) you could have problems. Plus if you are going to remortgage soon, the reduced rent could mess up the amount you can borrow.

david porter

10:08 AM, 21st November 2020
About 2 weeks ago

loss of 360?
How much would a void cost?
Advertise it and see what happens
At that point you can make a decision.
How much will it cost him to move?

EvolutionBlogger

16:13 PM, 22nd November 2020
About 2 weeks ago

With my properties in London, new tenants are paying 10-15% lower than the old ones. Your tenant isn't doing anything wrong by asking for a reduction. If the market was buoyant, you would ask for a rent rise.
Why not offer £1,400 pcm? Say that you're willing to do that because they are a good tenant, but that you can't go any lower.
I don't think you need to worry about him asking for another reduction in 12 months. If the market is better, then you just say no

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