Rental Contract with Tenant Maintained

I recently took over the lease on a commercial property that has a 3 bed property above it. The 3 bed property had a sitting tenant that had a verbal agreement with the previous owner.

The property when it was verbally let to the tenant was in a state of disrepair, so they were offered it at a reduced rate (around 50-60% of the market value). Considering the tenant had already put some work in to tidying and decorating the property when we took over we agreed to let him continue with the reduced rate.

My problem now is that I need to get this on to a contract, but after reviewing all the details of tenancy agreements, they all state that the landlord has to maintain the heating and hot water (as well as structural integrity etc). The property doesn’t have adequate heating. It has the odd electric heater but not sufficient, but this was how it was when the tenant agreed to take the property at the reduced rate. The property also doesn’t have a stable supply of hot water.

How do I get this on to a contract that won’t potentially bite me in the backside later on? Right now I’m busy sorting the business that runs under the residence, I don’t have time or funds to do anything with the residence. If/when we do decide to do something we will then have to raise the rent to market values (although we are considering splitting it in to AirBnB style units if/when we get to it). I already know the current tenant won’t pay market rates. I’m happy for the tenant to live there while they are maintaining the property and it’s not causing me any problems. Otherwise I’ll have to ask them to leave.

Any thoughts on the best way to approach this?

Im afraid you ard going to have to upgrade the property asap. You cant create a contract where the tenant is responsible for maintensnce. The tenants doesnt have to sign a contract anyway.

Unfortunately upgrading the property right now isn’t an option. The only two options are to find a way to do a tenant maintained contract or ask the tenant to leave and we’ll leave it empty until we have the time and funds to do the work. It’s looking like I’ll have to make someone leave the home they want to live in for the sake of paperwork

It hardly sounds like “for the sake of paperwork” when in your own words the property does not even have a stable supply of hot water!

There is no possibility for the tenant to sign away his rights (and your responsibilities) that are set out under Section 11 under the Landlord and Tenant Act 1985.

It seems most odd that you purchased a property without being sure you had the funds to make it legally compliant.

Your poor tenant!

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Unless the tenant is a dupe, you should also expect any attempt to evict him from this hazardous property will be exceedingly long and drawn out!

I suggest you try posting about your plight on LandlordZone forum which is a lot busier than here.

Try reading the actual post. I had no intention of updating the residential part of the property any time soon. I bought a business, that had a residence with a sitting tenant above it. My focus was solely the business.

The residence was rented by the previous landlord to the tenant. The tenant took the property full of rubbish from squatters, in a poor decorative state of repair and with no stable hot water supply and poorly heated. He took it in that condition on the basis that he was getting it for half the market rate it would fetch if all of those were done.

When we took over I would have asked him to leave immediately, but he wanted to stay and I saw no harm. The only harm here is the paperwork. I fully appreciate if I had let the property to him in the first place and was asking market rate that I would have to meet the usual obligations (we have a house we rent, we meet them fully for that house). But that is not the case here. He wanted to take the property in worse condition than it is now, and still want’s to live there, but because of paperwork I’m going to have to ask him to leave.

It isn’t a case of being able to ask the tenant to leave. To begin the process of ending a tenancy you can serve a section 8 notice if tenants are at fault under specific grounds or a section 21 no fault notice provided you have evidence tenants were served with required info at start of tenancy (under previous owner). This includes EPC certificate, how to rent guide and gas safety cert(if there is gas). It doesnt sound you could meet this criteria so you have no legal way of ending the tenancy.

You may not like the responsibilities that come with what you have purchased but you have to follow the law.

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Well, my understanding is that unless there is a contract in place and/or the tenant has started paying rent there is no actual tenancy to end and so the contractual law you speak of does not come into play.

The tenant hasn’t paid any rent, and has no contract.

The existing contract with the original landlord continues to be in place. A tenancy can’t be ended just because the property has changed owners. (Similarly, statutory laws can’t be overridden by anything in that contract).

The tenant should be paying rent (to you). Presumably you’ve given the tenant your details, which is another legal requirement - section 3 of the Landlord and Tenant Act 1985.

Anyway, do try posting this on LandlordZone. You will get better replies if you post about your predicament there.

I know you’re trying to help, but this doesn’t help. There is no contract of any form from me or the previous landlord. The previous landlord just let him move in and then a few weeks after doing this realised he didn’t have enough experience to run the business and sold it on.

From the tenant side you’re probably used to landlords trying to get out of looking after tenants. We never wanted to let the residence. We just let the guy live there because we felt sorry for him after all the work he had put in to clear the place out, and because he wanted to live there. The other part I’ve forgotten to mention is that there is no separate energy supplies, and no separate meters. The residence is supposed to be occupied by the owner of the business, but we don’t need it. So the guy has had months of no rent and no energy bills, so he’s hardly hard done by.

We simply do not have the time or money to do anything with the residence. The business need a lot of work doing on it at considerable cost. That combined with it being a business that had been run in to the ground means there is no spare cash to change a tap washer never mind do anything else. So all the do gooders looking out for the tenant, I’m not asking them to leave out of badness, it’s simply if paperwork/laws are making it so that he can’t live there under the terms that he wants to, then I’ll have to ask him to leave

A contract doesn’t have to be in writing to be valid. You can have verbal contracts or implied contracts where the actions of the landlord(previous owner) created a tenancy agreement.

Clearly it is better to have a contract in writing to protect both sides.

You may not like the advice you are given but it is valid and you have to accept you are in a weak position to end the tenancy given the laws that apply. The laws apply to ending a tenancy as much as they do maintaining one.

An option would be to offer the tenant a new contract with multiple months rent paid upfront which could be used to fund the improvements, if you offer a discount to market rates this could be a good option for both sides.

If the tenant was in there paying rent to the previous landlord then he had a tenancy and an undocumented contract. When you took ownership, you “stepped into the shoes” of the previous landlord, but unless the requisite s48/s3 notice has been served on him giving him your name and address details, he is entitled to withhold the rent.

The tenant has not paid any rent to anyone, including previous owner, since day 1.

@Richard19 - Thanks for the suggestion, but even multiple months up front wouldn’t cover the cost of gutting the place and installing heating etc

Our long term goal was always to gut it and turn the rooms in to AirBnB’s. I’ll just ask him to leave and leave it sat empty. It’s sad that all the do gooders with their laws force people that are perfectly happy to have to change their circumstances. The guy lived in caravans before, he’s more than happy with the 4 walls around him. But the laws mean he’s not allowed to live how he’s happy to

The perils of buying with a sitting tenant. Tho I bought a commecial like that 25 years ago Never a problem always paid , Still there

Ah, if the tenant has never paid any rent to anybody then yes, that does change things!

If no ‘consideration’ has been paid, as well as there being no written or verbal agreement, then indeed there’s no contract.

If the tenant could show that he had put in a lot of his time and effort refurbishing the property in lieu of rent - let’s say for example if he was a jobbing builder - then that would be different. But I understand that’s not the case here either.

Actually I was imagining a different situation to the one you now describe. I was thinking he had been there for years.

Well - I’d say then that the best way forward is just to bribe him to leave. Enough to get him set up somewhere else ought to do it, maybe offer him enough for 3 months rent and a deposit in a local HMO…

If you have good evidence that hes never paid rent and that he also hasnt contributed to the upkeep of the property, (monies worth), then you can exclude him by changing the locks whilst he’s out, but if you get it wrong, he can claim illegal eviction, which is both a criminal and a civil wrong.

@David122 Appreciate the thought but I’d never do that to him. He’s a nice guy. I’ll just ask him to find somewhere else to live and give him some time to find something suitable. I’m in no rush other than I’m paying his energy bills. The residence itself I won’t get to for a while so him being in there isn’t a problem for now other than that.

If you’re going to do that, then don’t demand any rent or you will create a tenancy.

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