Facing rent freeze dilemma?

Facing rent freeze dilemma?

0:02 AM, 31st January 2024, About 4 months ago 7

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Hello, some background the property is based in the London/South East region. Tenants were struggling historically and large arrears built up during covid.

Eventually, the tenants recovered and have been paying rent on time during the past year but made minimal (as in near zero) effort to deal with the arrears until the issue was forced (with hints of “action”) a few months ago. Now rent is paid on time (and has been so during the past year) and a payment plan is in place but passing rent significantly below market.

Obviously, my costs and mortgage have rocketed and profit is now hovering around 0.

Tenants have demanded no rent rise for the next 12 months as they need to be in the area and will find it difficult to move. Moving locally means paying the (higher) market rents.

The tenants cited that they are repaying the arrears plus the current (below market) rent and have already maxed them out. Looking at the living situation, it probably has an element of truth but overall an exaggeration and tenants had refused to disclose financial information.

Tenants upkeep of the property is probably a 5 out of 10. So, required spending ££ on redecorating periodically.

Broad categories of actions – (a) Meet demand (b) meet half way, (c) Issue acceptable rent rise (say, mid single digit £100 pcm) but stay below market (d) Go to near market anyway

Thoughts appreciated. Thank you,

Richard


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Comments

John

10:36 AM, 31st January 2024, About 4 months ago

You need to see what their income is now. This is no different to assessing a new tenant. If a new tenant wouldn't disclose their income they would understand you would not let to them.

So establish this first.

I would be wanting to recover my lost unpaid rent. So write a formal repayment plan. It maybe they can repay all the rent in a year, but a rent increase as well could be too much.

So get them to repay everything as soon as possible and then make it clear the rent will rise anyway to the new level.

You need to work out yourself what DEAL the tenant is getting by staying in your house compared to moving and paying the higher rent. If they are better off staying and paying off the arrears with a new higher rent after a year they will go for it surely (no moving costs as well, plus you chasing them for unpaid rent).

lips24x

11:28 AM, 31st January 2024, About 4 months ago

Hi Richard,
I am afraid you are losing all round in this situation.
They are in arrears for rent which was below the market at the time.
The rent is currently below market but they are stating you cannot raise the rent while they begin to repay the arrears.
You are losing rent currently by not raising the rent to a suitable level.
If you do not raise the current rent the discount you are giving the tenant is in effect being used to pay the arrears.
My view would be that the tenants need to pay the current market rent or slightly below and make reasonable arrear payments.
If they decline claiming insufficient income request proof of income.
If they decline to provide proof of income they are not working with you to resolve the matter so issuing of a S.21 notice via Landlord Action will resolve the matter one way or the other.
If they go you can market the property at market value and move on.

This may seem harsh but if they cannot afford the property you need to find a tenant who can

Jim K

13:18 PM, 31st January 2024, About 4 months ago

Hi.
Not a lawyer but have thought through the same issue.
I believe there will be 'rent stabilisation' and to get ahead of the curve.
Why not explain to the tenant - I am going to fix the rent at the current market rate and reflect that in a new AST.
Then tell them you will discount the rent for say 6 months (1 yr?) by £x.
Leaving them with a sum they can afford. You keep the rent at current market rate until Stabilisation kicks in.
T also gets to understand what local rents really are. I find some do not.

Michael Booth

17:32 PM, 31st January 2024, About 4 months ago

Section 8 if you have all the proof rent is owed or bite the bullet write off the rent and section 21 asap.while you can .

Fed Up Landlord

22:30 PM, 31st January 2024, About 4 months ago

Stop being Mr Nice Guy. Landlords are not a charity. Tenants will walk all over you if you let them. Section 8 and Section 21. Get them out and re-let or sell.

Frank Jennings

0:20 AM, 2nd February 2024, About 4 months ago

Reply to the comment left by Fed Up Landlord at 31/01/2024 - 22:30
I agree with this option. You are being pushed around and losing money to the point of no profits at all. What are you going to do when they need to have work done to fix things that are broken?
That is not a reasonable business model and needs fixing immediately. Send them a S21 and S8 ASAP,
because they can't afford the rent you need to charge to make it a proper business with profits. Once they have gone get new tennants and charge the correct rent for that area and property, and don't ever let it fall behind again! Always increase your rents to the correct average rate, every year. It very quickly falls behind if you don't and you will get yourself into lots of trouble.

Freda Blogs

9:27 AM, 2nd February 2024, About 4 months ago

The lack of available alternative accommodation at a price your tenants can afford, whilst unfortunate, is not your problem. If things are so bad, presumably they have friends or family who can support them – it is not your responsibility and you leave yourself very exposed should the property require expenditure whilst you are operating at a zero margin.

Would your tenants work for £0, particularly when taking on the legal and financial risk that you are doing in order to let this property? I doubt it.

I agree with others that you are being too nice, and perhaps are being manipulated. My suggestion is to clarify their financial position via re-referencing and sound out the prospect of getting a decent guarantor so they can’t skip out owing you money. Those would be a pre condition of them staying. If they don’t agree or if they fail, then you need to set out the hard financial facts and let them know that the tenancy is not financially viable and that a S8/S21 notice will be coming their way soon. Get ready to do that so you can be quick off the mark to serve after a difficult conversation, as the relationship will almost certainly go south after that.

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