Property Blog

It is not uncommon for tenants to want to vacate a rented property before the natural end of the tenancy agreement. In this instance, where do the Landlord and Tenant stand legally?

Source: J. Daines – LettingaProperty.com

To sum it up - a tenancy agreement is a legally binding agreement between two parties so when you sign the agreement you must be absolutely sure that you are prepared, as a Landlord, to let the property go for the term and, as a tenant, to pay the rent or consideration for the property, even if circumstances change or you do not ‘like’ the property anymore.

Most tenancy agreements are created for a fixed period of time e.g. week, month, year etc. A standard Assured Shorthold Tenancy Agreement is a minimum of 6 months to maximum of 3 years.

The tenancy is legally enforceable by both parties and can only be ended or terminated in four ways:

1 - Agreement between the Landlord and Tenant - This is where both parties agree to surrender the terms of the tenancy agreement. In most cases, this would be agreed in writing by the Landlord and the keys should be handed back to the Landlord or Letting Agent. Generally, Landlords would seek to find replacement Tenants before the existing Tenant vacates and the existing tenant would be liable for the rent until the new tenant moves in. It is sometimes agreed that the existing Tenant would pay for any costs associated with finding new tenants such as Credit Checks etc.

2 - Performance – This is where the actual period of the agreement has come to a natural end. Bearing in mind that for an AST, tenants are not required by law to notify their landlord that they intend to leave the property at the end of the agreement. If the tenant does not vacate, the tenancy would revert to a Periodic Tenancy Agreement. The Landlord is required to issue a notice to the tenant call a Section 21 Notice 4(a) during the initial fixed term and the notice should be issued with 2 months remaining within the fixed term. If the Tenancy becomes a Periodic Tenancy, the Landlord would issue a Section 21 Notice 1(b) requiring possession.

3 - Breach of Contract– In unfortunate circumstances, if a Landlord or Tenant breaches the terms of the tenancy agreement, they may find themselves at the nasty end of legal proceedings. Landlords are able to serve notices onto tenants during the fixed term of the agreement based on legal grounds – for example – if the tenant withholds 8 weeks rent from the landlord, the landlord may serve a Section 8 Notice based on Ground 8 of the Landlord and Tenant Act. There are 17 grounds under which the Landlord can serve notice on a Tenant and the first 8 grounds are called mandatory grounds, meaning that the Tenant would be ordered to give back possession. The rest of the grounds are discretionary grounds, meaning that the Judge may not give possession back to the Landlord immediately and instead, give the tenant a warning not to carry on that particular breach of contract.

4 - Frustration – An agreement would come to an end when something happens which is the not the fault of either party such as the death of the Landlord or Tenant.

The most common instances of ending an agreement are when both parties agree as in example 1 or the agreement sees out its agreed term as in example 2. So, if either party wanted to end the agreement, it would need to be done by careful negotiation.

The good news is that divorce rates in England and Wales are at their lowest for 26 years as reported by the Guardian in August 08. However, there are still 11.9 divorces to every 1000 married men and women in the UK. The toughest economic question for those 11.9 couples is “Do we sell or rent out the house?”

Source: J. Daines – LettingaProperty.com

They say that moving home and divorcing are two of the most stressful things in life. Consequently, when you combine the two, your emotions and mental well being will be tested to the extreme limits. It is important to try to think of the property as a business transaction or investment. Try to think as clearly as you can before you both make a decision that you may regret. Weigh up the pros and the cons of each decision and take it from there.

Marilyn Stowe, of Stowe Family Law has suggested that the recent economic crisis may have had an effect on divorce rates as “people just can’t afford to get divorced at the minute”.

For those unfortunate couples that are able afford a divorce, they still have to answer the million dollar question “Should we sell the house or rent it out?” This might sound extremely cynical however, if you speak to any estate agent, they will tell you that separations and divorces appear to pick up after the festive season as couples decide to sell their family investment. As pointed out by our beloved high street retailers, the festive season looms. Will you be having this discussion with your partner in the coming months?

As the housing market continues to fall, more and more couples are deciding whether to sell or to rent. Considering your own personal circumstances, selling may appear to be the easiest option – you might be looking for a clean break, a release of equity to start your new life, however, your “pot of gold” that you have both worked for, has most likely been depleted (by as much as £30,000 on the average UK property price according to figures recently released) and to sell your property would be a financial disaster.

So what can you do?

You and your partner may consider renting out the property. Who knows, with Agents reporting a 45 – 50% increase in tenant demand, you may even be able to make your full mortgage payments. However, the decision to rent out your property should not be taken lightly. In most cases, this decision will mean that you and your ex will need to work together for the next 6 – 12 months or for however long the tenants remain in the property.

So you have decided to rent it out – what happens next?

Make sure that this is a decision that you both want to take. As joint owners of the property, you will both need to agree to the tenancy agreement.

Our top 10 tips for new landlords start with your Mortgage Lender (if you have one that is!)

• Consent to Let - you must (at all times) inform your Lender of your intention to let your property. This is commonly referred to in the Industry as ‘Consent to Let’. Some Lenders are fine with this and some ask you to change the product that you are on to a Buy-to-Let mortgage.
• Landlord Insurance - you must have specialist landlords insurance on your property when you are renting it out. If you do not inform your current buildings insurer you may risk invalidating your policy.
• Tenancy Deposit Scheme (TDS). This is now a legal requirement and landlords face big financial penalties if caught out. For all tenancy agreements that started on or after April 6^, 2007, landlords are required to protect their tenant’s deposit using one of the Governments authorized schemes. For more information, please visit www.direct.gov.uk/en/tenancydeposit.
• Gas Safety Regulations – It is a legal requirement for you to provide a copy to each of your tenants of a valid Landlords Gas Safety Certificate which has been carried out by a Corgi Registered Plumber and is usually valid for a period of 12 months.
• Energy Performance Certificates (EPC) – These will be effective come the 1^st October 2008 and are a legal requirement. Landlord will be required to provide a copy of the certificate during the lettings process. Even though Landlords are not legally required to carry out any suggested recommendations in the EPC it is always worth considering that tenants may use this as a deciding factor when choosing a property to rent. The EPC is required by law when a building is constructed, sold or put up for rent and can only be produced by an accredited Energy Assessor.
• Tax Liability - It is wise to consider that as a Landlord, you are effectively running a business and will need to declare and income and expenses to the Tax Office – Any good accountant should be able to advise you on rental income tax.
• Keys – Make sure you have enough sets of keys cut for each of your tenants.
• Money – Do not release the keys to the tenants until you have your deposit and first month’s rent which is cleared in your bank account.
• Mail Redirection – ensure that you have all of your post re-directed.
• Make sure your agent is a Member of a Recognised Landlords Association as you may need assistance in the future. If you have any problems regarding your tenant, they are always on hand to be able to help.

Lastly, if you do not want to be directly involved with your tenants, find an agent that offers a full management service and re-visit the situation in another 6 – 12 months. Hopefully the market will have picked up by then and you can both afford to sell the property and limit any extra financial loss.