We have recently purchased a property with tenant in situ. The tenant is a single lady with children aged 19 and 16 years old. They’ve has been living in the property since 2009. The AST has never been renewed and is currently periodic. The tenant’s partner is on the tenancy agreement but he left long ago. The rent has been increased only once for 13 years, from £525 to £575 . The current market rent for similar property is £900-£950.
Am I legally allowed to increased the rent to £800 , which is £225 increase? There is a clause in the agreement from 2009 that the rent will be increased annually by the consumer price index. Using the consumer price index calculator the current rent should be £ 845
We met with the tenant and told her we would like to increase the rent to £800, which is still under the market rent. She verbally agreed. I drafted an agreement, posted and emailed her the agreement asking if she is happyto sign it. It’s been 2 weeks and she hasn’t replied to my messages, calls and emails. I assume she doesn’t want to sign the tenancy agreement. What is the best thing to do in this case? Also, her son is 19 years old . Does he need to be included in the tenancy?
Its clearly not in her interest to sign this new agreement and you cant compel her to do so. As you probably realise, you cant serve a s13 notice to increase rent if there is a rent review clause in the contract. If you want a higher rent than the clause allows, then your only certain option if she wont sign is to serve notice to recover possession of the property. The notice would have to be served on all tenants.
If she does agree to the new tenancy then she will need to give a valid notice on her existing tenancy first or you could be accused of illegally evicting the former partner.
Its not essential to have the 19 year old on the agreement from a housing law standpoint, but your insurer or your lender may insist. You would need to now do a right to rent check on him anyway.
now is the time to spend some money on professional advice. this is an unusual case and no doubt you bought at a good price. personally i would like to be on an up to date AST as much has changed. She will be getting advice too and no way are you going to be friends so keep it professional and pleasant as im sure you will.
Thank you very much for your advice. We did pay about £ 30,000 below the market price. It seems that when buying property with sitting tenants issues are inevitable. I will need to look for professional service as she is gonna be a difficult tenant.
Thanks for your reply. Much appreciated. The AST it’s statutory periodic at the moment. I read that if it’s statutory periodic you have to issue S13 to increase the rent regardless of any clauses.
Wow that’s a 30% rise in rent for your tenant in one go. With inflation and electricity prices that is a huge increase. Since you were able to get the house for £30,000 less than it is worth can you not be a little kinder? Perhaps put the rent up annually over a longer period. Also how good a tenant has she been previously would be the question I would ask. Good tenants who pay a lower rent are better than bad tenants who don’t pay a higher rent.
She knows she’s been paying very low rent for years. She verbally agreed to my proposed rent increase and didn’t even try to negotiate. Considering I will be paying £ 460 interest per month, I don’t think £ 800 is high rent. No wonder more and more landlords are selling up. We are running a business not a charity.
1/ What ever you do, you need to have a clear paper trail.
2/ Do not leave yourself vulnerable and protect your interests, as well as the tenants, be fair, however realise this is a business, not a charity.
3/ Avoid the temptation of making an agreement between yourselves, as the tenant may change their minds at any time.
4/ Section 21 will be abolished soon, then it will be more difficult and much more costly to remove them with a section 8. Compliance as a landlord is the same for all tenants, i.e. those on low rents as well as those paying current market value. ** the cost to you will be the same, deal with this urgently**… serve notice now, you don’t have to give a reason.
5/ Because you have been discussing the rent increase as a possibility already with the tenant, tread carefully as this could be seen as you are putting them under pressure and causing them stress could be argued in court as forcing her, to accept the rent raise with no choice.
6/ Have a conversation with them (make this a final one with regard to plans as a landlord, explain you have just bought the property, you are not sure what your plans are with the property right now… that’s all you need to say.) Then inform them you will be serving the required section 21 notice and are happy to provide a reference for the time they have been your tenant. When you have property back, to maximise the value, decorate, check the local competition and know that a little money spent now, can make a massive difference to the rentability and return on your investment. Make sure you check affordability of any future new tenant. Good luck.
If you end up having a reasonable conversation to agree the new rent, remember to serve all the necessary administration information, otherwise you will be on a very sticky wicket if things go wrong or legal.
I have exactly the same thing but I only increased the rent £75 on a much more expensive property. It’s your choice, especially if the tenant gets into financial difficulty later and then you have to get them out. You’ll use a good chunk of that £30k.
Your mistake was to buy a property with a tenant in situ. The only consolation is that you possibly got the property at a considerable reduction? If so, you may have to lower your sights.
I have been in the same situation for over a year. It has taken me a long time to understand that swift repossession is the most effective answer. Negotiation is a one way journey.