Newbie landlord q:what kind of AST if we intend to increase the rent after 6 months?

gemma.zhang

Hi all,

We are first time landlord, just managed to find a tenants right before Xmas! We accepted their offer of £100/month less than the market value, mainly because we don't want it to be empty over dec and Jan time. The tenants intend to buy within next 6-18 months and looking for short contract. EA suggested that we sign the 6 month fixed AST contract with them, and increase the rent in summer to bring it back to market value and should be easier to find tenants if they don't accept the new price.

Would like to know how easy it is to execute in practice? Is it better to serve them contract with the clause rent increase by £xx after fixed 6 months period?

Advice please... How would you go about it?

Cheers!

lighting_up_the_chalice

With the current demand for housing, there are usually only 2 reasons you cannot secure tenants:

a) The condition/location/size of the property.
b) The rent as advertised is too high.

So, you secured the tenants without changing the property but by reducing the rent. The level of rent you needed to charge in order to attract tenants IS, therefore, the market rate.

There are a few ways to increase the rent. You can issue a new t/agg on the expiry of the current agreement. But this relies on the co-operation of the tenants. They may choose to not sign and go on a statutory periodic tenancy. If so, you would have to serve notice that you intend to increase the rent in line with the rental periods. You can, of course, serve this notice prior to the end of the initial 6m fixed term, but you are unable to enforce it before then.

Either way, be prepared to go back to square one and the aggro of finding new tenants for a house you are advertising at a price you couldn't let it for 6m previously.

How long would it have to be unlet before you lose the rental equivalent of 6 months WITH the increase, opposed to 6m WITHOUT the increase? (ie what % of the monthly rent is £100). If, for example, £100 is 10% of the rent, then you are looking at almost a years increased rental to recoup a 1 month void.

As a matter of courtesy, I would notify the tenants of your intention. Otherwise, I would anticipate an un-cooperative end to the tenancy, refused viewings and at least 1 month of void losses.

franklee

gemma.zhang wrote: »

We accepted their offer of £100/month less than the market value, mainly because we don't want it to be empty over dec and Jan time.

Market value is the price it would let for after a reasonable time on the market. The rental market moves quite fast so I'd say that would be a few weeks at most. Therefore a market rent would not mean a void over Dec and Jan time. So I would suggest the tenants are paying the market rent.

Say the tenants end up buying in the middle of their estimate after 12 months. You'd only be trying to get the higher rent for six months. So you would want to turf out a good tenant for the sake of 600 less the cost to swap tenants? I'd suggest you look at the cost to you of swapping tenants, agent fees, void time especially if the tenant is not inclined to co-operate due to the proposed rent increase. At the very least you should let them know of your plan to increase the rent before they sign up as a rent increase after just six months is unusual.

If you're going to swap anything it may as well be the agent as they seem to be spinning you a line on market value.

Fire_Fox

A re you a member of a landlord's association?

Yorkie1

I may well be wrong, but if you go down the s.13 rent increase notice rather than the new AST, isn't there a 12 month delay after the start of the tenancy before you can rely on it?

Fire_Fox

Yorkie1 wrote: »

I may well be wrong, but if you go down the s.13 rent increase notice rather than the new AST, isn't there a 12 month delay after the start of the tenancy before you can rely on it?

I think it's twelve months after the last section 13 was issued. They can increase the rent at any time after the fixed term expires, possibly before depending what clauses are in the AST.

Mr_Pitiful

Yorkie1 wrote: »

I may well be wrong, but if you go down the s.13 rent increase notice rather than the new AST, isn't there a 12 month delay after the start of the tenancy before you can rely on it?

With contractual periodic tenancies they would have to wait a year, statutory periodic they can serve as soon as the fixed term ends.

gemma.zhang

franklee wrote: »

Market value is the price it would let for after a reasonable time on the market. The rental market moves quite fast so I'd say that would be a few weeks at most. Therefore a market rent would not mean a void over Dec and Jan time. So I would suggest the tenants are paying the market rent.

Say the tenants end up buying in the middle of their estimate after 12 months. You'd only be trying to get the higher rent for six months. So you would want to turf out a good tenant for the sake of 600 less the cost to swap tenants? I'd suggest you look at the cost to you of swapping tenants, agent fees, void time especially if the tenant is not inclined to co-operate due to the proposed rent increase. At the very least you should let them know of your plan to increase the rent before they sign up as a rent increase after just six months is unusual.

If you're going to swap anything it may as well be the agent as they seem to be spinning you a line on market value.

Thanks!! Yes, if tenants are good, might be difficult to do that, may as well as letting it roll on. However, really don't want to get to nov, dec again to find tenants next time.. Not many ppl viewing!!

gemma.zhang

Fire_Fox wrote: »

A re you a member of a landlord's association?

Yes, we just signed up for NLA, speed up the learning process this week!

gemma.zhang

What are the cost involved changing tenants?
EA we pay per month when there is tenant in, so won't have costs there.
Guess would be things like : inventory check, cleaning, maintenance touch up, deposit scheme.. What else?

Fire_Fox

If you run an advanced search landlording issues have been covered many times.