Buying an investment flat with existing tenancy

harry66

Hi,
Me and the missus have been saving our pennies and have enough now to buy a small flat for investment (pension) purposes.
We have made an offer on the flat and it has been accepted.

The flat currently has an existing tenancy with a guaranteed rental income plan which expires at the end of the year - but the owner can terminate with 1 months notice if we wanted vacant possession.

We are tempted to take over the tenancy / sign a new tenancy with the existing tenant / guaranteed rental scheme.

Thing is not sure what kind of things to look out for / check out before we decide which way to go. Any tips or advice? Any pitfalls to watch out for?

The current owner says the property is managed by the agency who provide the guaranteed rental scheme and they pay him like clockwork etc. I know we could get more rent if we self managed or rented out through another agency. But we would rather do without the stress and not bothered about the lower rent we get through the guaranteed scheme - a steady reliable income source is more important...

Thanks in advance for any replies

BitterAndTwisted

Why would you chose to take on someone else's tenant who you know nothing about?

Get the agent to give you all of the documentation about this alleged "rent guarantee scheme" so you know what you might be taking on. Lots of them have all sorts of fancy exclusions which you might not find out about until after you try to make a claim.

I'd be minded to only purchase with vacant possession and find my own reliable tenant. One whose references and credit-checks I have seen and understood.

tim123456789

As he has already mistakenly told you he can evict in one month (he can't)

I would take everything that the current owner says, with a bucket of salt.

In particular the bit about being paid promptly, it being easy to transfer the contract to you, etc etc.

You need to check this bit very throughly before you proceed

theartfullodger

The tenant could have been there for years at actually be a rent-act tenant (regulated tenant) who you cannot evict at all, regardless of the paperwork showing a signed AST....

or, it could be a sale-and-rent-back dodgy deal with "guaranteed rent" (aye, right..) that if it ever got to court would be ruled unfair & tenant can stay as long as he likes...

or, it could be "guaranteed rent" (aye, right..) deal where YOUR tenant is the agency & they let to the occupant.. nightmare...

Nope: deal with a boring vacant-possession deal or with a landlord selling a property where you know when occupants moved in (eg I bought one with young students.. at Uni I could check up on them at..).

Have you been educated in landlord/tenant law?? Understand how agents can runs rings round you?? Appreciate that letting property is not always profitable?? Appreciate some tenants and some agents never pay you??

harry66

The current owner claims he is signed up to a guaranteed rental scheme - has been for the past 3 years.
He does not control the tenancy etc - it is the letting agency who does that. I believe they provide short / medium term housing for the local authority.
I have checked the website of the letting agency and they do indeed offer such a scheme.
The question is - can I rely on my solicitor to obtain and verify all the necessary documentation etc before the exchange of contracts etc or is it up to me to verify everything?

G_M

No. Do you own research.

Check everything:

*the tenancy. Is it an AST? Have you seen it? Start date? Fixed term? End date? Or periodic?
*the deposit. was there one? How much? Received when? Registered? Where? When? Will it be transferred to you aspart of the sale?
*Tenant(s). How many? Joint & Several? Are actual occupants the same as the named tenants? Who are they? Working? Where? Ages? CCJs? Credit history?
* the rent. Confim tenants pay regularly (as well as) checking apyments from agent to LL
* Inventory. Isthere one? Did tenants sign it?When?
*Gas certificate (etc). Up to date?
* Rent guarantee scheme. Check the small print! (only you can decide if it's a good dealor not, for you)


Take NOTHING for granted. Once you own, ALL the above, and more, becomes your responsibility.... or problem.

Read

New Landlords (information for new or prospective landlords)

BitterAndTwisted

harry66 wrote: »

I believe they provide short / medium term housing for the local authority.

Hells bells! And do they guarantee to supply you with the funds to refurbish the property once these LA tenants trash the place? No, they do not and neither will the LA.

The kind of tenants LAs put in private rentals like this are the kind of tenants they do not want to give a secure tenancy to. The kind of people you DO NOT want as tenants! Bargepole. Do not touch.

Buy it with vacant possession and find your own reliable referenced and credit-checked tenants.

Werdnal

OP, under English housing law you CANNOT evict a tenant within a month - no ifs, no buts, no stupid, unenforceable clauses in unregulated contracts with third parties who do not know their !!!!!s from their elbows - legally you cannot gain vacant possession within 1 month!!!!!!! Minimum notice is 2 months, followed by a possibly lengthy and costly court order process!

If you do not know anything more than this about tenancies, letting or buying investment properties, you need to do much,much more research. Do not take anyone on the selling side's word for anything. Do your own research and understand what you are getting into BEFORE you even think about buying this or any other investment property.

You have made an offer ... you should have done your homework long, long before you got to this stage!

I have let property for 13 years, and would never take an unknown, unproven, 2nd hand tenant, regardless of any fancy "guaranteed rent" (guaranteed grief) type agreements. Please think carefully before you proceed with this. General concensus here is the guarantee rent schemes are not worth the paper they are written on - yes, nice rent coming in every month, soon written off by the state the property is left in when the tenant finally leaves ... if the tenant finally leaves ... at your expense.

If you want to invest, find a nice little flat that you have total control and peace of mind over! Set it up your way from the start, and don't get involved in any "deal" struck by anyone else. Or continue with this one, on t e understanding that the LL exercises his claim to be able to evict this tenant within a month, at his expense, and give him all the hassle ... if he is keen enough to sell, let him do the dirty work!

Oh and as for signing a new tenancy agreement with the tenant, you are bound by the agreement already in place. You can offer the tenant a new agreement, but they have a right to refuse to sign it ... you have to accept what is already there.

harry66

Thanks for all the responses so far.
I think we have been far too naive about all this.

It is looking increasingly like we will ask for vacant possession....and let it out to private tenants rather than council ones.

Werdnal

If you haven't already been recommended to it, there is an excellent post here by GM:

http://forums.moneysavingexpert.com/showpost.php?p=41160642&postcount=12

which will give you a good insight into letting and your landlord obligations.

I think you are very wise to steer away from taking this tenant on under the current tenancy/deal. If you want to proceed with this property on a "vacant possession" basis, ensure you get full written confirmation, and if possible visit to check yourself that the tenant has gone. LL/Vendor may say "Oh tenant will go on xx date as I have issued them notice", but notice is only the first step - 2 months duration (in law) plus once this ends, possibly 6-8 weeks on top awaiting court order application, then maybe even another delay whilst baillifs are booked to enforce the eviction and chuck the tenant out - so if a valid notice (sometimes notices can be dismissed at the court application stage and LL has to start all over again) is issued today, at best tenant may leave within 2 months, at worst it could be 4+!

As you are investment buyers and in no hurry, do not be tempted to rush in until you can categorically ensure the property is empty ... and the disgruntled tenant hasn't wrecked it on the way out either! I would advise you not to even exchange until you know its empty and can check the condition its been left in.

Guaranteed rent deals always sound inviting, but you lose control over who is in the property, how long for and what damage/repairs are neglected at each changeover. If the "deal" with the council is for say 3 years, you could have 6 changes of tenant during that time, and each change could result in the property deteriorating further, yet you have no automatic right of inspection or access, and at the end of the 3 years, no proof of who is responsible for the damage, and therefore no recourse to a deposit or court action to sue anyone! The guaranteed rent is a good selling point, but well outweighed by the total lack of control you have over your investment.

Read the linked post above, and all the links in contains and if you have any specific questions, come back and ask again.

And remember, buying the property and finding tenants is the easy bit ...