Buy to Let - expenses claimable from tenant

Dal_Whinnie

I have a leasehold flat which I sublet and have an agent manage it on my behalf. As the leaseholder of the property I get charged an annual maintenance charge by the management company managing the overall development. These costs include cleaning of common parts, gardening, insurance, etc.

I would have thought that I could pass some of these costs to my tenant but my agent says that the Housing Act prohibits me from doing so (the flat is let under an assured shorthold tenancy). I have asked them for details of the relevant sections in the legislation but they have not been able to quote this for me.

It appears odd that costs which are incurred purely for the benefit of the ultimate tenant cannot be charged on to them. Does anybody know the relevant legislation on this?

Dal_Whinnie

I thought I might just bring this back to the top in case someone out there does know the answer

antrobus

I'd have thought that the "relevant legislation" would include the law of contract. If you've entered into a contract to let a flat at £x per month, then there will be a tenant who is entitled to possession of the flat in return for the payment of £x. What it costs you to keep your end of the bargain is your affair. The extent of said costs may well determine what level of rent you wish to charge for the property, but they are your costs.

Soot2006

The extent of said costs may well determine what level of rent you wish to charge for the property, but they are your costs.

^This
If you want to charge the tenant £30 for service/maintenance, then just include it in the rent. If your rent remains within market value then you shouldn't have a problem finding someone who will pay this.

Mrs_Z

As Soot2006 has said, the service charge is your responsibilty to pay but you set the rent so you must take into account what your expenses are so that the rent covers them (morgage payments, service charges, letting agent fees, etc).

princeofpounds

It appears odd that costs which are incurred purely for the benefit of the ultimate tenant cannot be charged on to them.

You really want to have your cake and eat it too, don't you. The freeholder service charge is for the benefit of YOU as a leaseholder.

Keeping the place in good condition allows you to attract a tenant.
Keeping the place insured will allow you to recover some money if the building falls over.
Keeping the place maintained means that you don't have leaks in your roof damaging your property and so on.

The tenant doesn't have a particular interest (besides the practical inconvenience) if these obligations are not met - they can move on.

Properties require maintenance to keep in habitable condition, they are not free money machines for landlords.

You can of course try to pass on costs, but only as a part of rent, and if your rent is not competitive you can say 'hello void period'.

Werdnal

Ground rent and maintenance charges cannot be passed to the tenant. They are your costs as part of running your LL business, and as such, can be used as an allowable expense against your tax return.

Any business needs premises, yours just happens to be a residential premises rather than an office or similar. You therefore pay the ground rent and maintenance charge to keep your business premises in good condition!

Next you'll be asking the tenant pay your buildings insurance (as it covers the building they live in), the EPC fee (because its tells tenant how efficient the property is), the GSC fee (because it prevents them being poisoned by CO) and any demands HMRC hit you with on your rental income (as the tenants are paying you rent so they make you liable for tax) :rotfl:

Annisele

Come on guys; be nice to the newbie :-)

In principle "my LA has told me something, I'm not sure it's true, so I'm going to check with MSE" is a very good attitude to have. Plenty of newbie LLs get in trouble taking their LA's word as gospel!

But I agree with all the others; you've contracted to let the flat out at £x, so you can't now turn round and say it's £x plus expenses.

Dal_Whinnie

Thank you all for your comments. I am aware that the legal responsibility for the service charges are mine. What I was asking my agent when I last had a new tenant was whether I could effectively charge the tenant a variable rent to take account of certain elements of the service charge. So instead of charging say £100 I would charge £80 plus service charge contribution based on actual service charges levied. This might, of course, be more or indeed less than £100.

I am not looking to have my cake and eat it and I appreciate that this might not be practicable and that some may see this as being totally iniquitous but it does seem to me that those elements that are directly impacted by tenants behaviour would not unreasonably be borne by them.

However, back to my question. My agent tells me that The Housing Act prohibits me from entering into a contract with a tenant that allows me to charge rent on the basis I have just set out. I cannot see such a restriction in the Act. I have asked my Agent to confirm what section states this and they have referred me to their solicitor who has failed to respond to my question. So I wondered whether anybody on here knew the answer.

G_M

whether I could effectively charge the tenant a variable rent

No. This would be an unfair term in the contract as the tenant would not know what they were signing up to, and would have no control over it.
With the 'variable' gas bill, for example, the tenant could choose to switch off the boiler and cut their gas bill. With your service charge, they could not.

And what if the freeholder levies a one off maintenance charge ie for a roof replacement? Would you pass that on to the tenant too?

Thrugelmir

Dal_Whinnie wrote: »

So instead of charging say £100 I would charge £80 plus service charge contribution based on actual service charges levied. This might, of course, be more or indeed less than £100.

So if the roof requires replacing your tenant may end up with a bill of several thousand pounds .........

Although they receive minimal benefit from the financial contribution made.