Benefits of a family partnership we had not previously considered17:22 PM, 6th December 2019
About 23 hours ago 0
UPDATED – 28th May 2019 – this is still as valid today as it was when first published on 21st August 2014.
I have just helped my brother to draft a Surrender of Tenancy Agreement, you can download a copy at the foot of this article, but the story behind it is an interesting one too.
The property was purchased at auction a few years ago, it was an absolute bargain but it’s 250 miles away from where he lives. It was refurbished but rather than sell it and make a quick profit he decided to hold it as an investment. Note that my brother is a property developer and pays the additional rate of tax so if the property had been flipped the profits made would have been taxed at the additional rate as trading income, OUCH! By letting it as an investment and selling it later on the profits would be taxed at the 28% CGT band, less the annual CGT exemption for him and his wife – no brainer!
The first set of tenants were great and stayed just over two years. The property was re-advertised but the second time around the tenant demand was lower. My brother was ready to go on a four week holiday and had considered selling the property on his return. However, a few days before he left a couple made an application to rent the property. The basis of referencing was that rent would be 50/50. She passed referencing but he failed. A commercial decision was taken to accept them anyway subject to 6 weeks deposit. Better than a void period right?
A month into the tenancy Mrs Tenant cheated on Mr Tenant so he left her and went back to Mum. Rent payments became sporadic and she would text day and night with excuses and looking for emotional support. Arrears never quite got to two months so there was little that could be done in terms of serving notice and possibly having to apply apply to the Courts for a possession order until the fixed tenancy period expired. Fortunately, she decided that enough was enough after four months, she didn’t like being in debt and wanted to go back to Mum and surrender her tenancy. A lucky escape for my brother to say the least, he was only too keen to agree!
An agreement was reached amicably, i.e. the tenants would be released early from the tenancy and my brother would keep the deposit to offset the majority of the rent arrears. This still left a few hundred pounds of arrears but my brother agreed to write that off. Thankfully she was very clean and tidy so the flat is fine. It’s now on the market for sale and will probably be snapped up by another landlord or first time buyer in the area. It’s a cracking little property. [UPDATE – the property was indeed sold very quickly to another investor]
Being a shrewd landlord my brother wanted to get everything properly documented so that nothing could come back to haunt him further down the line, e.g. husband learning that wife had moved out and him moving back in or claiming illegal eviction etc. I helped my bother to put the agreement together and he’s buying the beer this weekend – he doesn’t know that yet though 😉
By the way, I did run the agreement past my barrister friends, just in case you’re wondering. He gave it the thumbs up with no suggested amendments **oh how I wish I knew how to do a smug smiley right now**
If you would like a copy of the Tenancy Surrender Agreement for your files, just in case you ever encounter a similar issue, then you can download it by completing the form below. My brother wants nothing out of this but he has asked me to charge £5 per download for the agreement template and for us to use the money to subsidise the running costs of Property118.
You probably don’t need the template today but why not download it anyway? You will be helping to support Property118 and you will have it on file if you ever need it. If you wait until you need it then you may struggle to find this article again so do it now 🙂 It’s only a fiver!
The heated debate with “Industry Observer” was eventually concluded on page 5 of the comments thread!
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