Verbal Agreement

[jo_mo31]

Just wondering if anyone can help,
My partner and his brother inherited a house from their Grandfather three years ago. The house has tenants who have been there since 1991; and after much debate are on a statutory periodic tenancy. They had an AST, which was renewed once but then it became a Statutory Periodic tenancy, according to our solicitors, all the paperwork and the tenants themselves.
They are on a very low rent, 25% of the current market rent. My partner and his brother were looking to increase the rent to a reasonable market rent and our solicitors wrote them a letter to that effect. (They had it assessed by a local letting agent and after much wrangling the tenants let them in)
The tenants have responded to the solicitors letter stating that early on in the tenancy, the tenant carried out some major structural work to the property, adding a single storey bathroom to the back of the property and in return their Landlord, (my partners grandfather) agreed that they could have a lifetimes low rent.
We have no written record that this was agreed, and the tenants don’t seem to (unless they are holding back on it until the last minute), in fact from the documentation we have from their grandfather it seems that he wasn’t too happy with the tenants. They were frequently in arrears which he was constantly chasing, between 1996 and 2001, which is the last rent book records we have. No-one remaining in the family remembers such an agreement and their grandfather had no mental health issues, right up until his death in 1996. The tenants are very nonchalant, completely believing it is their house.

We were just wondering whether anyone knows where we stand with this, our obvious aim is to increase the rent and get them to sign a new AST agreement. Our solicitors are also looking into it for us, but just wondered if anyone had any thoughts?

Thanks

[jeffrey]

A letting created before 28 February 1997 cannot be an AST unless- before it began- L serve T with a Notice under s.20 of the Housing Act 1988.

[dominic]

You can't orally agree a lifetime's fixed low rent, as that would imply you were agreeing to a lifetime tenancy, which, assuming it was anticipated Ts were not in the last 3 years of their lives, must be created by deed (i.e. in writing and labelled as a deed) to be effective. Their claim is therefore that it is not an SPT, but fails at this hurdle, on that reasoning.

The most your grandfather could have agreed orally is 3 years low rent, presumably matched by agreeing to let it to them for at least another 3 years.

However, even if the agreement made by your grandfather with them is not binding, be prepared for them to cause you hassle as a result, which may mean, ultimately, going through lengthy eviction proceedings to regain vacant possession to relet it.

As a matter of good will only, you could assess what value Ts have added to the property by the major works they undertook (instruct a surveyor for this purpose), and if the total "discount" in rent they have received since undertaking that work is less than the value added, you might agree to extend their low rent period until such time, but reverting to market value thereafter.

[jo_mo31]

A letting created before 28 February 1997 cannot be an AST unless- before it began- L serve T with a Notice under s.20 of the Housing Act 1988.


In response to jeffrey's reply above. Their Grandfather did serve the tenants with a s.20 notice which we have and was signed before the tenancy agreement.
Now you are aware of this, do you have any further advice?

[jo_mo31]

Thanks very much dominic, very helpful.
We suspect that they are going to cause quite a fuss and it maybe a lengthy and costly process to raise the rent or get them out.

[jeffrey]

A letting created before 28 February 1997 cannot be an AST unless- before it began- L serve T with a Notice under s.20 of the Housing Act 1988.


In response to jeffrey's reply above. Their Grandfather did serve the tenants with a s.20 notice which we have and was signed before the tenancy agreement.
Now you are aware of this, do you have any further advice?

So it could be an AST (old-style) unless it purported to create a term exceeding seven years.
How low a rent is 'low', though? Schedule 1 to the Housing Act 1988 sets-out cases which, by definition, cannot be within the Act.
See paras. 3/3A/3B/3C re low/nil rents: http://www.statutelaw.gov.uk/content...&filesize=2232

[jo_mo31]

Thanks Jeremy,

The tenancy agreement is fixed term for two years from 1991 - 1993 and then was renewed 1993 - 1995, after this it was not renewed, and I therefore understand it became a statutory periodic tenancy. It was not creating a term of over 7 years.
The rent is not as low as described in the housing act extract you have given.
The rent is currently 25% of the current 2010 valuation, which may or may not have been low in 1991. It was increased one in 1995 by £36.00 per month.

[jeffrey]

Thanks Jeremy.

Who's that, then?

[jo_mo31]

Forgive me, jeffrey

[jeffrey]

The tenancy agreement is fixed term for two years from 1991 - 1993 and then was renewed 1993 - 1995, after this it was not renewed, and I therefore understand it became a statutory periodic tenancy. It was not creating a term of over 7 years.
The rent is not as low as described in the housing act extract you have given.
The rent is currently 25% of the current 2010 valuation, which may or may not have been low in 1991. It was increased one in 1995 by £36.00 per month.

OK. So T is holding an SPT. The seven-year problem does not arise and not does the low-rent problem.
To increase rent, and assuming that there is no contractual rent-increase mechanism, serve a s.13 Notice.