First Section 21 notice in 20+ years looming?

First Section 21 notice in 20+ years looming?

11:40 AM, 23rd June 2022, About 2 days ago 2

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Along with my own portfolio, I look after a single property owned by my elderly mother. It is the last one of my late father’s portfolio, the others having been sold some years ago as they became vacant.

This one, the tenant has been in for 25+ years on an AST. Occasional rent increases have occurred, but due to the tenant being little trouble, it is around 50% of the current market rent.

Costs of maintaining it, and the administration, have obviously risen but mother has absorbed a certain amount, but the threat of the Renters Reform White Paper really is the “last straw”.

EPC is currently E, and although some minor improvements could be made, the tenant tends to be resistive to work being carried out. Achieving “C” is a pipe dream, its a 1890’s terrace.
No Gas to worry about.
Electrical inspection, it just about scraped through, and the work that really needs to be done will be very invasive.

Three options;
sell at auction with sitting tenant on low rent.
sell at auction, vacant and un-modernised
do enough for a private buyer and market it through an agent

I’d appreciate people’s opinions on a way forward. Personally, I’d prefer to serve a Section 21 and sell it vacant, but I’m concerned that if they don’t leave and we attempt to evict, whether tenancy agreements from 25 years ago and no doubt a “missing smoke detector receipt from 10 years ago” type technicality is likely to trip us up even though the tenancy agreement predates pretty much everything required when issuing a new tenancy today.

The other issue for me, is that in approaching 30 years of being a landlord, I’ve never had to serve a S21. I’ve been blessed with either good tenants or ones that just cleared off before being evicted.

All thoughts are appreciated and respected.

Smiffy



Comments

CMS

21:19 PM, 23rd June 2022, About A day ago

I think you need to speak to the agents and see what they think. I think you will struggle to sell the property with a sit in tenant that is on a rent that low but any buyer is going to want to increase the rent straight away and (a) you have already said about the current condition of the property; and (b) a buyer coming knows that its not going to be easy getting that tenant out.

That being said, you dont want to get vacant possession and/or spend money refurbishing the property if its either (a) not going to make it more appealing to buyers; or (b) if you're not going to recoup your expenditure on a sale.

Speak to some agents and see what they think. One other final question would be, what is your reasoning behind selling? Is it because you want the lump sum or have just had enough of being a landlord? If it is the latter, maybe you should speak to the tenant about their financial situation. They are obviously happy being there and if you could come to an agreement on a sale price, and you were not worried about having all of the money in a lump sum, you could effectively take a mortgage on the property for the sale price. You will no longer receive the but the tenant is more likely to pay you an increased sum if they know that they house will be theirs one day.

It also means that you don't have all of the concerns that landlords usually do. That being said, the idea is rubbish if you are hoping to sell and get a lump sum!

northern landlord View Profile

15:26 PM, 24th June 2022, About 11 hours ago

This is a difficult one. Sooner or later you will run into the buffers if you just carry on. In 2028 you won’t be able to make the C rating on the EPC but might well have to spend around £10,000 making the best efforts you can before you can be exempted. Likewise it seems you only just passed the electrical check, you will need another one in five years and maybe you might have to spend around £6,000 for a full rewire. By then you also will have to have paid for landlord registration, a decent homes inspection (which the house might not pass if things like kitchens and bathrooms are outdated, it has single glazing or you don’t have a modern heating system). You will also have to subscribe to an ombudsman scheme. So whatever happens you/your mother are going to have to lay out serious money (potentially up to £20K) in the next few years on the back of a low rent that might not cover it.
I don’t think your tenant would be very attractive to a buy to let landlord and would be seen as a liability rather than as an asset. If section 21 were still valid at the time, the new landlord who has no relationship with the tenant would just evict them. if you delayed until section 21 is banned the new landlord would be unable to evict them so you would not get a sale. A BTL landlord will also know about EPC changes and will factor that into any offer. So you might not be able to sell at all, or for anything like market price.
Your best bet with a business man’s hat on would be to evict the tenant yourself and sell to an owner occupier after getting the place valued as it is after the tenant has been there 25 years, with an estimate of what it would be worth done up to see if the expense and time are justified. As a landlord with other properties you know all this anyway. However, I expect the human aspect is the one praying on your mind. How stressful will it be for an older long term tenant who seems as if they may be a bit reclusive and has been favoured with a rent well below market value for years to be suddenly made homeless? Could they afford a market rent? You have to decide if your head or your heart should rule. It would certainly keep me awake.

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