I’m soon to exchange on a 2-bed flat with an existing tenant paying £600 when market rent in the area is £950. Tenant has been there since March 2022. I’m on a 25% deposit interest-only mortgage and the investment will not work for me if tenant stays on the same rent. I want to serve a Section 13 to raise the rent closer to market rent. £850 or preferably £950. If she says she can’t afford it, I have no choice than to serve a Section 21. It’s getting tight for Renters Rights Act coming in… Any advice is welcome…
Unless you’ve discussed with tenant and got the future rent increase agreed in writing and evidence they can afford, don’t even consider doing it. With the backlogs of s21s in courts it could be 6 month to a year before you gain possession. If after 1 may meanwhile tenant can challenge rent increase after 1 may and even when theres a decision (weeks not multiple months at mo) back payment not due and if they cant afford you will then need 3 months rent arrears before you can even serve grounds for possession.
Just agree to the property purchase based on vacant possession. If seller cant deliver cut your losses. Much better than the costs (£ and mental) of rent arrears and eviction
Good luck
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I tried to get an affordability check done but the seller refused to obtain the information I needed to complete my due diligence. (I know, maybe I should have cut my losses… and walked away… still not completed… so still could… ) ?
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This sounds dodgy. You need vacant possession. I would not exchange. That tenant then becomes your problem
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Yes i f youve not exchanged best just walk away
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“seller refused to obtain info” . Says it all does it not??
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you gotta wonder sometimes, you really have… life is hard enough…
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You are buying an investment. You need to be looking at the rental yield. Target is normally around 5 to 8% so as long as you’re paying somewhere between £90,000 and £144,000 for the property it all sounds good.
If you are paying more, then your rental yield is too low, as you have already established.
Either the income (rent) needs to go up, or the cost of the investment needs to go down.
Advise the seller that the figures don’t stack up. Ask them to increase the rent and prove tenant affordability, or reduce the price of the property.
If not, look for another investment.
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Have you scrutinized every aspect of the current tenancy agreement because if things weren’t done to the absolute letter when it was set up you may not be able to serve a valid S21 . Why buy a tenanted property where the first thing you may need to do is a costly and time consuming eviction?
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If you havent done full due diligence, you won’t know if all the pre-requisites were completed to allow you to serve a valid s21 notice. Your only option then would be to wait until there are at least 2 months arrears and serve a s8 g8,10,11 notice. Expect at least a year from serving notice to obtaining possession.
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Do not think i have spent x £ so need to carry on. I have a friend who pulled out of a purchase at the last day ,having spent nearly £2k when discovered a property was a “flying freehold” . Thus meaning if she ever came to sell, a mortgage company would not like it.
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Thanks for all your advice Community, it’s much appreciated. I will let you know how I get on. I’ve given the seller & his agent, a last chance to enable an Affordability Check to be completed, explained I would be employing professional OpenRent service that I will pay for. The seller’s allege they’re not related to the tenant but they’ve NEVER increased the rent for 3 years ?? The Tenancy Agreement doesn’t mention a Rent Review date ? Is it possible the Tenant has previously resisted a rent increase due to that ? Does it need to be written into the Tenancy Agreement (I think it does…) the seller stated they’ve never increased the rent… by way of explanation… it’s possible they tried and the tenant told them that according to the Tenancy Agreement, there is nothing in it that says they can increase the rent, and hence why she has enjoyed a low rent for 3 years… is this possible ? The seller is facing an increase in their mortgage costs so they are keen to sell… hopefully they relent and allow me to carry out an Affordability Check, I can’t imagine why they would resist it… unless the tenant is on a low salary and would not be able to afford a higher rent in the £950 market rate, advertised by the agent, so potentially misleading Marketing information… I will let you know..
I think you’d be surprised to know that I hvae a tenant in exactly the same situation. Some of us rent BMV out of choice because we have great tenants who we want to remain in situ. Annual increases aren’t compulsory. I think they’re telling the truth. Most ASTs don’t contain a rent review clause.
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Why do you think might be related? Rents did go up a lot in recent years. Dont trust sellers agent assessment get a couple of independent rental valuations. Check other similar properties online
The sellers might believe it but you dont have to have a rent review clause in a tenancy agreement to be able to increase the rent. The standard Openrent AST doesnt
By the time you exchange and propose a new rent and tenant has challenged and is later 3 months in arrears (after 1 May) and you have to start eviction it’s going to be too late.
If they wouldn’t let you do affordability check its likely they think tenant wont be able to afford 3years worth of increase (or will challenge).
Im not going to bet on this but i think youll be taking an unjustified risk proceeding- if the numbers dont add up on current rental, can you also afford to risk paying the mortgage for a year if you received no rent?
Good luck
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From a tenants point of view, one of 7 years and just being told we’re about to be served this as selling up (most likely to get more rent without asking if we would pay more) I understand it’s costly as a landlord but please understand that’s now someone’s home with shared memories and no one wishes to just up and leave. I see both views and neither is nice.
I hope you find a resolution to this that treats both parties well. The inflation is literally effecting everyone.
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Melissa thank you for your reply
The last thing I want to do is raise the rent to a level that the tenant can’t afford, hence why I’ve been asking strenuously asking for an affordability check. The agent’s company profess to sell a tenanted property, with potential for a higher return. Which inevitably begs the question,why hasn’t the current landlord managed to do the same ? When I’ve then been faced with a response that provides no more information, it’s left me with this situation where I don’t know what to do next, for the best and have had to reach out for advice 
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@jaswinder_dosanjh to be honest the numbers supplied dont make sense. If rent was 600 in 2022 then even with market rates having gone up 10% in one of the years since, the market rent wouldnt now be 950 or 50% more. Most people have not seen our income go up by 50% in 3 years.
Seller is proposing you take over tenancy ie enter into a business relationship with them. You know the 600 wont work. So you should be demanding to meet the tenants, at which point you can say you need to do your own referencing checks and agree that direct with tenant and do those, as well as finding out why no rent increases previously and whether tenant willing to pay over current 600 to stay.
If seller wont allow you to contact tenant direct, walk away.
Good luck
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You should be aware that many landlords only sell with a tenant in situ if there are problems with the tenancy and they can’t get them out. You should do full due diligence before proceeding.
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You seem to be saying there is some form of definition of ‘due diligence‘ ? Is there such a thing? Is every deal not unique, to all intents and purposes ?
Due diligence is relative to the deal. You’ve had plenty of advice here that you are unable to undertake the due diligence required to lessen the risk on this investment to one which we would find acceptable. No one here has recommended that you go ahead. You seem determined to in the face of all this advice which rather belies your motives for asking.
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