Reduction in rent procedure?

by Readers Question

15:11 PM, 23rd October 2019
About 4 months ago

Reduction in rent procedure?

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Reduction in rent procedure?

I have let a house to a couple who unfortunately had a fire in their own home, the rent at the time was £600.00 per month.

Their insurance company asked me to rent my house to them for six months, I refused saying that it was not worth it by the time I pay letting fees etc to my agent and then have a void till it re-lets. They then came back with another offer of £850.00 per month and I decided that this was worth it.

During a conversation with the new tenants I mentioned that I was thinking of selling the property in the near future at which point they said that they would like to buy it. We agreed that once their house was ready for them to move in and the insurance company stops paying the rent, they would put their house up for sale and I would reduce the rent to £600.00 per month until we exchange contracts on mine.

My question is because I change the rent do I have to re-protect the deposit and give them a new tenancy agreement along with all the other paraphernalia

Many thanks
Jack



Comments

Neil Patterson

15:18 PM, 23rd October 2019
About 4 months ago

Interestingly I don't think we have had this question so I am assuming it is the sort of reverse of an increase.
>> https://www.gov.uk/private-renting/rent-increases

" Rent increases

Your tenancy agreement should include how and when the rent will be reviewed.

There are special rules for increasing protected (sometimes known as ‘regulated’) tenancy rents.
When your landlord can increase rent

For a periodic tenancy (rolling on a week-by-week or month-by-month basis) your landlord cannot normally increase the rent more than once a year without your agreement.

For a fixed-term tenancy (running for a set period) your landlord can only increase the rent if you agree. If you do not agree, the rent can only be increased when the fixed term ends.
General rules around rent increases

For any tenancy:

your landlord must get your permission if they want to increase the rent by more than previously agreed
the rent increase must be fair and realistic, ie in line with average local rents

How your landlord must propose a rent increase

If the tenancy agreement lays down a procedure for increasing rent, your landlord must stick to this. Otherwise, your landlord can:

renew your tenancy agreement at the end of the fixed term, but with an increased rent
agree a rent increase with you and produce a written record of the agreement that you both sign
use a ‘Landlord’s notice proposing a new rent’ form, which increases the rent after the fixed term has ended

Your landlord must give you a minimum of one month’s notice (if you pay rent weekly or monthly). If you have a yearly tenancy, they must give you 6 months’ notice."

Kate Mellor

20:44 PM, 23rd October 2019
About 4 months ago

I think if you want to maintain a deposit you’ll have to refund and re-protect it so as not to fall foul of the tenant fees ban. I don’t think you can refund part of a deposit and keep the rest as is. You’d be best advised to check what you need to do with your scheme.

I’ve started using Zero Deposit recently which avoids the deposit requirements. It must be optional not mandatory for the tenants, but the basics are that the tenant pays the equivalent of one week’s rent to Zero Deposit and the landlord is insured for 6 weeks rent. If the tenant then doesn’t pay his dues Zero Deposit pays out and they then pursue the tenants themselves for the debt. They are insurance backed and FCA regulated so I felt confident they’d come through. They use TDS arbitration in the event of a disputed claim.

It may be an option that would suit both parties in this case as it frees up money for the tenants purchase costs and saves you a lot of extra paperwork.

Ray Davison

9:32 AM, 24th October 2019
About 4 months ago

I have wondered recently whether this sort of action will fall foul of the Tenant Fees Act! One of the provisions put in place to prevent workarounds by Agents/Landlords was that you cannot charge a higher initial rent (To cover fees?) and then reduce it later.
Clearly the reason here is not to circumvent the regulations but would it make your planned actions illegal?
I have in the past offered a loyalty discount to a Tenant who wanted a rent discount and promised to stay longer than the initial term. I gave him the discount at the back end in case he didn't honour his commitment to stay (Bird in the hand and known Tenant). I wondered how the Tenant Fees Act would affect things if I wanted to do something similar again and thought it likely to be prevented.
In your case I think a new Tenancy Agreement would be the safe option but this would not work if trying to agree in advance (And document) a later reduction as in my example above.

MikeT2018

9:33 AM, 24th October 2019
About 4 months ago

Hi - I recently sold one of my BTL properties to the existing tenant and we agreed a rent reduction from point of "offer" (£200 pcm) but rather than drop the actual rent, i made it a condition that he would continue to pay the full rent until completion. At which point i would refund the the difference between the reduced price and the actual rent he was paying. No legal agreement - mutual trust arrangement between the two of us.

Anything can happen between what you agree with the tenants between now and when (if) they sell their house. Worked out totally fine in my case - but then i had excellent relationship with said tenant.

Hope this helps

silversurfer2017

16:16 PM, 24th October 2019
About 4 months ago

I fully agree with the last comment. Keep the rent the same, do not reduce it, you cannot be absolutely certain that they will buy your property. They may see another property they like better than yours. Agree with your solicitor that instead of the usual amount of 10% deposit on exchange of contracts this will be reduced by so many months overpaid rents at £250 per month. The tenant will be certain of full value reduction in his purchase price and you will not be out of pocket if the sale doesn't materialise.

Michael Barnes

23:28 PM, 27th October 2019
About 4 months ago

"My question is because I change the rent do I have to re-protect the deposit and give them a new tenancy agreement along with all the other paraphernalia?"

Assuming that the tenancy is currently in their names, and not in the insurance company's name:

No.
But if you reduce the rent, then you may need to reduce the deposit to comply with the tenant fees act.

The TFA does not prevent you from reducing the rent, provided that you did not negotiate this in any way before the tenancy agreement was entered into (Schedule 1, para 1(6)(b)).


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