If you own investment property which you let to tenants, or are considering letting a property to a tenant to realise some rental income, this article may be of interest to you. Before you let a property to a tenant you ought to consider how you might get the tenant out again (evict the tenant) if you need to sell the property in the future, or if you were unfortunate enough to have a bad tenant.
It is advisable to see a solicitor to have a Tenancy Agreement professionally drawn up. If you inadvertently end up with the wrong sort of tenancy agreement then the tenant’s rights to stay in the property may end up being much greater than your right to bring the tenancy to an end.
The most common form of tenancy agreement is the Assured Shorthold Tenancy Agreement (or AST). These are for an initial fixed period of not less than six months (so that the tenant is bound to pay rent for that minimum period) and after that they roll over on a monthly basis unless a new AST is granted. If the tenancy is rolling over and the tenant wishes to leave he has to give the landlord one month’s notice. If the landlord wishes the tenant to leave it is necessary for the landlord to give the tenant two months’ notice.
If the landlord gives notice to a tenant to leave the property then you would hope that the tenant would vacate on or before the expiry of the two month’s notice. However this does not always happen because the tenant will need to find alternative accommodation. If the tenant has asked a housing authority to help re-home them then the housing authority may be unwilling to help the tenant find alternative accommodation until the court has made a possession order. Even if the tenant is willing to move out, the housing authority may advise the tenant to stay put. Indeed, if the tenant were to move out upon receipt of the two months notice then the housing authority could regard that as voluntarily homelessness and refuse to assist the tenant in finding alternative accommodation.
If the tenant has not moved out after the two months have elapsed then the landlord will have to apply to court for a possession order. A possession order typically takes several weeks to obtain. Once the possession order has been obtained then the landlord has to apply again to the court for a warrant of execution. Once the warrant of execution has been issued then a court bailiff will on a particular date arrange to evict the tenant and to take possession of the property. It is only after this that the landlord is able to take possession of the property. It is usual for the process, from serving the initial two-month notice to the bailiff taking possession to take around six months. During this time the tenant may have ceased to pay his rental or the landlord may have lost any buyer that he had for the property.
It is important to take appropriate references before granting any tenancy. If you have a mortgage on the property – unless it is a “buy to let” type of mortgage where the intention to rent the property out was notified to the lender as part of the application, it will be necessary to get the consent of your lender to any rental arrangements. Your lender may also require specific clauses to be added to the tenancy agreement to ensure that mortgage does get paid out of the rental repayments and allows the lender to end the tenancy if they have to repossess the property.
If you would like advice about tenancy agreements then please contact us.