Long Term Tenant - how to protect both LL and Tenant

Collapse
X
  • Filter
  • Time
  • Show
Clear All
new posts

  • Long Term Tenant - how to protect both LL and Tenant

    Hi All,

    I'm hoping for a little guidance. I'll almost certainly be following up with some professional advice but hopefully some folks here will have been in a similar situation and can offer some advice. I have done a quick search but not found anything obvious.

    I already have two properties I rent out, so I am reasonably familiar with the ins and outs of a "typical" tenancy. I have recently inherited a third property that I intended to sell however I have been approached by somebody who is interested in renting it. I had pretty much ruled out rental as a) the property is 200 miles away and b) needs a lot of work that I am not interested in doing. The prospective tenant is happy to take this work on themselves, which would be fine by me.

    The catch is that they want to rent it for a long period (at least 10 years). Whilst nobody can predict the future I'm comfortable with the proposal and in the much longer term it does open up a couple of avenues in terms of renting to subsequent tenants or possibly retiring, selling up and moving there myself. Failing that, an initial calculation suggests that as an investment the numbers appear to stack up.

    A little bit of reading around (thanks Google) suggests the approach might be to have:

    a) A typical AST agreement - that we would renew regularly
    b) A "Deed of Assurance" that would set out various items, such as:
    - what works the tenant will undertake, by when and do what standard
    - what would happen if an unforeseen circumstance required me to reclaim the property earlier than expected - the tenant is going to be spending a significant amount of his own money so would require this refunding at the very least. I was thinking along the lines of sliding scale so that this amount reduced annually to zero after 10 years.

    Without a doubt this is more complicated than it needs to be, but it is an approach that works well for us both.

    Is there an established practice for such arrangements?

    Thanks in advance.








  • #2
    Thanks Google but be careful. I think this "deed of assurance" is a bit nonsense.

    The terms of the tenancy should be in the tenancy agreement. A tenancy provinding security of tenure for 10 years should be a 10 year tenancy.

    But a tenancy for more than 7 years must be by deed and registered with Land Registry.

    A tenancy for less than 7 years is suggest to statutory repairing obligations on the landlords, which cannot be contracted out.

    Whatever you plan to do you need actual professional advice and a knowledgeable solicitor to handle drafting and the legal side in general.

    Comment


    • #3
      I'm just going to flag that regardless of the legal status, personally I wouldnt go near this with a bargepole. I think that if you try and give such security of tenure, you cant give it with the required checks and balances that I would need to be comfortable that I can mitigate my losses in a reasonably rapid way should something occur.

      I dont think you can easily make what you want fully legally binding. One side will need to take a leap of faith - if I was you, I would suggest it be you!!
      Any posts by myself are my opinion ONLY. They should never be taken as correct or factual without confirmation from a legal professional. All information is given without prejudice or liability.

      Comment


      • #4
        Bear in mind the possibility of stamp duty implications as well.
        Any posts by myself are my opinion ONLY. They should never be taken as correct or factual without confirmation from a legal professional. All information is given without prejudice or liability.

        Comment


        • #5
          I would suggest that you use a standard AST with an initial 6 month term.

          You have no reason to end the tenancy, neither does the tenant - but no one can predict things 10 years out.
          If it was a purchase and the situation changed, the purchaser can sell up - a long term lease puts you and your tenant in a worse position than a property owner at a fraction of the cost/income.

          Death, bankruptcy, divorce, dementia - how certain are you that these things aren't going to happen?
          Then there's changes in legislation and tax - more a risk to the landlord than the tenant.

          A good long term tenant with a sympathetic landlord is a brilliant and mutually beneficial arrangement, but my personal ability to plan gets a bit vague at three years, and ten would be a complete guess.
          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


          • #6
            Thanks for the comments so far everybody.

            I understand the "do not touch it with a bargepole" sentiment. A lot could happen in ten years... and I think if we do proceed then there has to be trust on both sides - which there is.

            The prospective tenant wants to make a number of improvements to the property - nothing unusual there but as this will go beyond the usual redecorating there is also a leap of faith on their side - basically that they are going to be able to rent the property for a longer term.to reap the benefit of the investment they are making.

            As suggested above I do think a standard AST is the way to go but if I was in their shoes I would want a greater degree of security before ploughing the money in.

            My hope is that it doesn't need to be complicated, but we are both cautious of being caught out by legislation somewhere along the line.

            It might be as simple having a separate agreement whereby if I have to kick him out earlier than expected through no fault of his own then I would reimburse him for the improvements made (and have the mechanism for calculating any amounts laid out in that agreement).


            Comment


            • #7
              O/P, for your homework, please write out one hundred times:

              'You should not let tenants ever do work on your property.'

              Comment


              • #8
                If work is being done, the landlord should pay for it and fold it into that year's rent.
                If the degree of trust is so great, spread the cost of the improvements over 10 years rent.

                If work is done and it's a fixture, the landlord owns it because they own the building.
                So the only come back the tenant has is some kind of contract, and if something has gone badly wrong that could take years to sort out with lots of legal costs.

                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


                • #9
                  Originally posted by jjlandlord View Post
                  Thanks Google but be careful. I think this "deed of assurance" is a bit nonsense.

                  The terms of the tenancy should be in the tenancy agreement. A tenancy provinding security of tenure for 10 years should be a 10 year tenancy.

                  But a tenancy for more than 7 years must be by deed and registered with Land Registry.

                  A tenancy for less than 7 years is suggest to statutory repairing obligations on the landlords, which cannot be contracted out.

                  Whatever you plan to do you need actual professional advice and a knowledgeable solicitor to handle drafting and the legal side in general.
                  I think the limit may be 3 years for an AST thats not executed as a deed. More than that and it has to be a deed. From memory, 7 years is the limit for an AST. I may be wrong.

                  Comment


                  • #10
                    If there is trust on both sides then you should have no problem whatsoever making it a 6 month AST and letting it go periodic whilst giving the tenant your assurance that you will let them stay for 10 years. If they are insisting on a 10 year contract there is no mutual trust. Begin to read this post again from the beginning and keep reading it until you have drawn up a 6 month AST.....
                    Unshackled by the chains of idle vanity, A modest manatee, that's me

                    Comment


                    • #11
                      200 miles. Work needing doing? Tenant wanting 10 years? Why on earth doesn't he aspire to buy a place?

                      Flip it in a local auction. Use the money to buy something local to you and let to a stranger for 6 months.

                      Comment


                      • #12
                        If you write ...

                        Originally posted by Paul4321 View Post
                        there has to be trust on both sides - which there is.
                        ... and follow it up with ...

                        Originally posted by Paul4321 View Post
                        if I was in their shoes I would want a greater degree of security before ploughing the money in.
                        You are revealing that, in actual fact, there isn't enough trust at this stage. Interestingly, although I think this is unintentional, you are also implying that you are less trustworthy than the tenant with your "in their shoes" comment!

                        Originally posted by Paul4321 View Post
                        we are both cautious of being caught out by legislation somewhere along the line.
                        This is where trust should necessarily fall short on both sides. There is no legislation that can guarantee everything that your agreement will weather a decade in part because the government can do what it likes with legislation and neither of you have any control over that. (and don't tell me democracy works ;-)

                        You started out by describing that you had inherited this property. You were lucky enough to have inherited it vacant. Imagine you had inherited a property locked into the kind of agreement you are planning to set up. You can't guarantee you'll live over the next ten years. Whoever you leave it to would have to honour the decade-long agreement if the tenant actually wants guaranteed security. I don't know what would happen should your tenant die with the arrangement set up... could their legatees inherit it? If so, even worse.

                        So, if you do against the advice received so far here and set this up, if you care about your legatees, make sure they're happy with it and the implications for them.

                        Comment


                        • #13
                          I would make a list of the improvements / repairs which are required and get some ball park quotes for the work from trades(wo)men in the area.
                          Then I would offer a 6 month rolling tenancy, at a fair rent. I would ask the tenant to quote for a few of the simple jobs, and pay him once completed. I would let the tenant rolls onto a periodic tenancy and over the space of 18 months pay him for the completed work (I would only offer to pay him for work he was legally qualified to do though)
                          My tenant's partner is a builder. I have recently asked him to quote for some pointing, through his building firm. Whilst it would be more tax efficient for them to have me knock it off the rent for a couple of months, I'd rather have a quote and be invoiced for the work. It seems clearer and cleaner that way.

                          Comment


                          • #14
                            Originally posted by DPT57 View Post
                            I think the limit may be 3 years for an AST thats not executed as a deed. More than that and it has to be a deed. From memory, 7 years is the limit for an AST. I may be wrong.
                            A tenancy of more than 3 years to be executed as deed (Law of Property Act 1925).

                            A tenancy of less than 7 years - landlord's repairing obligations (Landlord and Tenant Act 1985).

                            A tenancy of more than 7 years - registration with the Land Registry.

                            If you're going to agree a "long" lease. Offer a proper long lease. By that I mean you are selling a 99 years (or whatever) leasehold while you retain the freehold.

                            A 10 years fixed term AST (or even AT) makes no sense.
                            I am not a lawyer, nor am I licensed to provide any regulated advice. None of my posts should be treated as legal or financial advice.

                            Comment

                            Latest Activity

                            Collapse

                            • Wording on AST Renewal
                              MYork
                              I have been in this property for 14 months now (15/7/16). In at the end of April I received a letter regarding renewal of my tenancy agreement. When reading the letter it states if I wish to renew or alternatively if I wish to vacate the property so I was under the assumption that these were the only...
                              19-09-2017, 19:37 PM
                            • Reply to Wording on AST Renewal
                              tatemono
                              It is not illegal (currently) for LA's to charge an admin fee for renewal of an AST. Nor is it illegal for a LL to insist that a tenancy does not go periodic but is renewed with a further fixed term. It may not be what you want and you may be right to think it's not fair, but it's not illegal.
                              ...
                              20-09-2017, 09:20 AM
                            • Taking on a lodger and interpreting mortgage terms
                              Eigentum
                              Hi,

                              I'm new to this forum and to the world of property investment. I've recently purchased a second property on a residential mortgage for the purposes of being closer to my workplace for most of the week and also to ease myself into understanding the world of property investment. It's...
                              19-09-2017, 22:02 PM
                            • Reply to Taking on a lodger and interpreting mortgage terms
                              jpkeates
                              For tax purposes, you will have to select which of the two properties you own is your main residence (as CGT is payable on the other one).

                              Your mortgage terms may not allow the situation anyway, as normally a residential mortgage is assumed to be on your main residence, not somewhere you...
                              20-09-2017, 09:02 AM
                            • Reply to Wording on AST Renewal
                              ilovelettingagents
                              I'm referring to Letting Agents that present your options as being "sign a new fixed term and pay the fee" or "move out". This is clearly misleading, as the third option of a statutory periodic tenancy is not put forward. The tenant is in no position to negotiate anything - you either...
                              20-09-2017, 09:01 AM
                            • How early do you start advertising?
                              PollyW
                              I manage my own properties and have always waited until I have a vacant flat which is ready for letting before I start advertising.

                              I have a tenant due to leave in one month and I am concerned that the later I leave the advertising, the harder it will be to fill the flat, given the time...
                              19-09-2017, 08:19 AM
                            • Reply to How early do you start advertising?
                              boletus
                              One month before, usually have a waiting list by the time it is empty....
                              20-09-2017, 08:54 AM
                            • Reply to Wording on AST Renewal
                              security2
                              Yeah, it's shocking isn't it. You sign a legal contract, under UK law, and the least you'd expect is to be able to walk away from it and for any of the terms that you agreed to and signed up for to be just ridden roughshod over...

                              Some people need to take responsibility for their own actions!...
                              20-09-2017, 08:18 AM
                            • Reply to Wording on AST Renewal
                              ilovelettingagents
                              Yeah this appears to be a widespread industry scam, which is apparently perfectly legal. Even if you'd argued for a periodic tenancy though, you may well have found yourself in the same situation as me, with a S21 on the doormat and facing eviction. As the law stands, you either dance to their tune...
                              20-09-2017, 07:36 AM
                            • Landlord (me) or agent to register deposit - pros & cons
                              123Landlord
                              Hello,

                              I'm writing my ideal specification for employing an agent - I'm a very optimistic person!

                              So this is hypothetical ... I'm trying to work out if it's better to get an agent to register a deposit or register it myself (even if I pay for a fully managed service).
                              ...
                              18-09-2017, 19:40 PM
                            Working...
                            X