Mechanics of temporary rent reduction for tenant

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    Mechanics of temporary rent reduction for tenant

    Hi,

    I rent out a house to a family (wth 2 adult children). They moved in in December, have been good tenants and all of them are self-employed in industries that are highly likely to be impacted by the current shutdown. The monthly rent is 1,700 and it's let on a fully-managed basis through a letting agent (who I've been working with for a few years now).

    I am in the fortunate position of being able to countenance a lower rent for a few months (at least until my partner and I have jobs!) and would like to unilaterally give them a 50% rent reduction for the next 3 months, so 850 instead of 1,700.

    I talked to the LA who said that it isn't possible to engineer a temporary rent reduction (said the TA doesn't allow for it, the RGI will become invalid, etc) and the only thing I can do is refund the tenants an amount (up to me) after the LA has paid through the net rent to me. For obvious reasons (tax on 1700, paying the LA cut on the full rent, etc) I would rather not do that.

    Is what the LA said accurate? Is there a mechanism I can suggest that allows me to give the tenants a temporary rent reduction without impacting the terms of the tenancy agreement and the RGI?

    I would be grateful for any advice on this matter.

    Regards,

    J

    #2
    You can simply write to the tenant telling that for x months (specify them) you are happy to accept £x as the rent in full, rather than the usual £1700 and that, after that period, the rent will revert to £1700.

    You may find that your agreement with the letting agent means that they will be entitled to their fee based on the full rent.

    If you do decide to follow the agent's advice, you would record the £850 rebate as a cost, which is allowable against income, so the effect for tax purposes wouldn't be negative (as far as I can work out!).
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      Thanks jpkeates

      If I can record the rebate as a cost on my SA, then I'll probably just reduce the discount a bit (to cover the LA fee staying the same) and go ahead with that. Even though it does somewhat defeat the purpose as the tenant still has to come up with the cash for the full rent in the first instance.

      Comment


        #4
        It's possible that if the tenant pays less than they're meant to, the agent's internal system would record the amount as arrears, which is why they're unable to be as flexible as you.
        When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
        Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

        Comment


          #5
          Bear in mind that the Agent may still expect their full fee, not a percentage of your reduced rent. Also bear in mind that arrangements like this can fall foul of the Tenant Fees Act, which specifically prohibits rent reductions so close to the start of the tenancy in case they indicate a prohibited payment in the first months, but in practice its unlikely that anyone will cause a problem over that.

          Comment


            #6
            Thanks DPT57 I hadn't thought of the TFA at all.

            Hopefully that risk will be lessened by a formal letter setting out the background to this temporary rebate/discount.

            Comment


              #7
              I certainly wouldn't be offering rent reductions to a letting of 4 adults, or any tenant unless they asked for it. It will paint you as a soft touch, and be the thin end of the wedge.

              Comment


                #8
                Thanks for your opinion JK0 , I see your point and to each his own. But it's just my way of attempting to do my bit in these (hopefully temporary) difficult times.

                Obviously, every landlord's circumstances are different and I fully understand that this may not be a possible, desirable or sensible action for others.

                Comment


                  #9
                  I'd keep your powder dry until it is needed.
                  This is just the beginning.

                  Comment


                    #10
                    It is great you are willing to help. It is best to send them a letter, to say if they get into difficulties to contact you.

                    So lets say you decide to take payment of £850, but leave the remainder as a debt on their account. It is strategically useful to have a debt. You can tell them you will review the matter at the end of the tenancy. By all means write if off.

                    The reason, I say to leave the debt. They are going to change the law, to get rid of S21, so it means you can't get your property back. Lets say if the tenants are causing problems. If you have debt, you can use S8 due to rent arrears, to get your property back.

                    Also, if they rely on housing benefit, then they need the correct rent.

                    This is not the end and it will go on for some time.

                    The Government needs the economy to be as normal as possible and it is reliant on tax revenue.

                    As landlord, I will be compassionate. If someone can't work because they have been ill or lockdown, then I will be helpful. We should not put pressure on people to go to work, if they have symptoms.


                    Comment

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