Should I issue a new 6 month AST to an existing tenant?

by Readers Question

10:55 AM, 19th December 2013
About 6 years ago

Should I issue a new 6 month AST to an existing tenant?

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Should I issue a new 6 month AST to an existing tenant?

I have one property that I am currently renting out which has been tenanted for the past year (with no late rent payments) to a husband and wife and their two young children. At the beginning of the tenancy I took out rent guarantee insurance just in case they defaulted on their payments. That way my mortgage and possible legal fees would be covered.

The one year fixed term period has now ended and the fixed term tenancy has rolled into a periodic tenancy. Recently the circumstances of the family have changed whereby the husband has moved abroad for work purposes but he is still sending money over to his wife for support and maintenance. The wife is studying part time at University and is appealing to the university for some extra funds that can help her out. To this extent, they have requested to see her AST proving that she is indeed renting on her own, thus she has asked me for a new fixed term contract with just HER NAME on the AST so that she can show the University. Should I issue a new 6 month AST to an existing tenant?

When I notified the rent guarantee company of the change in their circumstances they said they would need to reassess the tenants before taking on a new policy on a new AST. The assessment has since come back declined and when the tenant’s Mum was added as a guarantor to try and help, it still came back declined as the Mum is a little older and doesn’t earn enough to cover the rent payments in case of default.

What would you advise I do in this case? I was reluctant to issue a new 6 month AST without the rent guarantee as I try to minimize any risk and have heard horror stories of removing tenants who stop paying rent. I have no evidence of this happening with my current tenants, but no one knows the future, and although they have paid on time in the past, this change in their circumstances may change that, even though they have stressed that it wouldn’t. The tenant is a bit stressed about it as she was hoping I would just issue a new AST and didn’t know I had an insurance policy in place.

One last piece of information to add to the equation; they both have a property (possibly council but not sure) which they are renting out, and the insurance company have said the tenant declined to declare her rental income which could have increased her score. They are certainty not experienced landlords so maybe it’s down to fear or because they haven’t got the paper work in place to show the insurance company.

Sorry for the long post but I wanted to try and explain the situation as accurately as possible. Please can you offer any advice about steps I should consider taking?

Should I just issue a 6 month AST or should I not?

Thanks in advance.

Leon



Comments

Mark Alexander

11:18 AM, 19th December 2013
About 6 years ago

Hi Leon

I would be very reluctant to issue a new tenancy on the proposed basis if I were you. By the sounds of it the RGI policy is an important piece of armour for you.

From what you've said I very much doubt that her husband will pass the guarantor referencing either now that he's working abroad. You are holding the trump card at the moment in that you have something your tenant wants. Chances are, she can also find you what you need given she has a massive incentive to do so, i.e. a guarantor.

I would keep the pressure on if I were you, she's bound to have other friends and family she can ask. You could intensify the pressure by serving a section 21 notice, you can then choose when you actually apply to the Courts for possession. This could save you a couple of months of waiting time with no rent if things don't work out.
.

Gary Nock

7:22 AM, 20th December 2013
About 6 years ago

I would be a little cautious here. If she is still with hubby why sdk for an AST in her own name. Could be a benefits fiddle on the go here. And if you grant a new AST just in her name and get RIG in her name and hubby returns to live with her then if they default then you may find the RIG invalid. If hubby is still working and they are still together there was no need to change the AST. This smacks to me of some deception to get addditional benefits. Be careful.

Jeremy Smith

19:40 PM, 20th December 2013
About 6 years ago

I think Gary is right, given that she won't declare her income from her own rental property for your RIG, which is either because she is not paying tax on the income or because, as you said, it might be a council property that's been sub-let, which breaks her ts & cs with the council.

Her application for funds to the university would also be hindered if they knew about her other (rental) income, seems to me she is just trying to play the system for as much as she can get out of it !!
Incidentally, if she is a (mature) student, living alone with her kids, she will presumably be claiming HB (*confirmation required here! ), but perhaps not declaring either the money from hubby, or the rental income....

...And if this is the case, will she be bothered if she then turns the screws on you as well ?

...Are we being too harsh ?

Barbara Thorning

13:08 PM, 22nd December 2013
About 6 years ago

I agree with Gary and Jeremy absolutely!! Why the reluctance for transparency? If she/they are without conscience about concealing information from the university and either their council or mortgage provider, they'll have no compunction about doing the same to you. Deceitful people are deceitful people, even more so where money is concerned.


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