UK Landlord Forum / Life

Hello,

So I'm an idiot- I'll admit that right away. For reasons that I'm struggling to see now, I never protected the tenant's deposit when it became law to do it.

So now I need to sell the house and I'm wondering how many problems this is going to cause, and if it's going to be easier just to live in my car for the rest of my life....

I've had the same tenant in the house for 9 years, a lovely person who looks after the house really well and would like to say there for the foreseeable. I've apologised profusely for needing to sell and explained my reasons and said that I would try to sell as a buy to let if possible so they don't lose their home. They've been really understanding about it thankfully.

Is there anything I can do to salvage the situation? The tenant originally gave me a cash deposit back in 2011, can I just give it back now? or can I protect it now?

The other issue I have is that the rent is quite low- I've charged the same rent for the whole time as they have done the minor repairs to the house and as they were such an easy tenant who asked for nothing, it didn't seem right to put the rent up. How does this affect selling the house? Can a new owner make the tenant have a new tenancy agreement? Or would I be better asking him to sign a new tenancy agreement now on a higher rent (and protect the deposit now) which although would mean he would be paying more money, he would then have a new 6-month tenancy agreement? Would this affect the house value though?

Urgh- head melting. I feel that I'm out of my depth here. I probably need professional help (of more than one kind) but thought I would ask you guys first as you are usually great :-)

Please state all the times you agreed a tenancy with the tenant and its terms. E.g. X months fixed term in 201Y, X months contractual periodic tenancy in 201Z.

Thank you for the reply 
The tenancy was originally a 6 month AST from the 1st December 2011, which has just run on since then and hasn't been changed.

Then just return the deposit (get proof). Limitation period for making a claim for the deposit penalty is six years. Inability to issue s21 notice by the landlord unless the deposit is returned still applies, but the tenant wouldn't be able to claim for a deposit if so desired.

No, the new owner/landlord cannot force the tenant to sign a new tenancy agreement, but they can obviously serve notice to the tenant.

Phew, thank you. I didn't think it would be as simple as that! So a S21 notice could be served if the deposit had been returned? (not that I want to do that, but it could put off buyers if it was going to be difficult to evict a tenant)

Could the new owner raise the rent? I'm concerned that the low rent might put potential buyers off. Or is that something I could/should do? Not ideal maybe, but the tenant might be on board for that if they knew I was doing all I could so they could stay in the house.

Any new landlords can propose new rent via notice or agreement with the tenant same as you. If via notice and the tenant disagree, they can take it to tribunal for an amount to be determined.

That's great, I can leave that to the new landlord then.

Thank you so much for your help, it's hugely appreciated. I'm very glad it's not looking like the disaster I thought it might be.

A new Landlord might not think this is as appealing a prospect as you think... unless the purchase price is made appealing... which you may not find as appealing.

Thanks for the reply. When you say that, do you mean buying a house with a tenant in situ isn't an appealing prospect, or the low rent?

- The buyer (new landlord) will want to maximise their return on investment. A low rent will not be attractive to them.

- The buyer has no idea, apart from what you say, whether they are a good or a bad tenant. Why should the buyer trust what you say?

- The buyer didn't vet the tenant and there is no current credit reference check available for the tenant.

- The buyer may want to do some significant work on the property before re-letting it. An in situ tenant will prevent them doing that. Having to evict the tenant will not be appealing to the buyer.

Firstly, if you limited your buying audience to Landlords only... and then an even smaller audience of Landlords who are willing to take on an existing Tenant... you are opening your purchase up to people who will aggressively haggle your price. I know, I've done it myself. I've heard about it and it's expected. The Landlord will never "fall in love" with the property, or let heart rule mind. So selling to a Landlord means you should expect lowball offers.

Secondly, I have bought property as a Landlord and I've never bought with a Tenant... I wouldn't. Too much unknown for my liking. I prefer a fresh start and I see no advantages to me, as Landlord, in stepping into the shoes of another Landlord (unless I know I'm getting a property for £10,000 less than it could sell for, maybe). The low rent is also a factor... yes, a new Landlord can come in and try to make changes... yes, the Tenant is under no obligation to sign a new tenancy agreement. It's fraught with the risk of both parties ending up unhappy. Lastly... you obviously have let us know you didn't protect the Deposit "when it became law to do it" (which was well before 2011, by the way)... so we automatically (justifiably or not) start to wonder about what else you didn't do... don't get offended, because it's not meant like that... but if you fail in some of your obligations did you fail in others... and did you avoid doing any maintenance on the property (it seems like they did it, to what level of quality?)..? Those kinds of questions float around our heads... don't get me wrong, there's nothing more we (I?) love than a "distressed seller".

A woman in Barnsley wanted £109,995 for her house... I viewed it and thought, there's no way it's worth this much... she opened up in the conversation and told me that it was effectively a forced sale so her and her partner could move on cleanly... and split the proceeds / debt... I did a second viewing and told her I didn't think it was worth more than £90,000... probably £85,000 and she looked like she was going to cry... I gave her some friendly advice and pointed out flooring that was a bit wonky, a boiler that looked decrepit and something a bit suspicious about external water marks from the roof. She said she had a better offer from one of these Homebuyer schemes... "National Hooooome-BUYERS!" ...and I gracefully bowed-out... 2 weeks later she texted me and asked if I'd like to view again... the homebuying company had started to alter their "guaranteed" price and it was now lower than what I'd suggested (she wasn't clear on that, but why else would she be in touch?)... she invited me around and said I would come with a fine tooth-comb... at the same time I askded a friendly Roofer to just drive by it and eye-ball it - he told me it would need £800 to £1,000 spending on the roof. I took a socket tester and it lit up in all sorts of ways it shouldn't on some sockets... I wanted to offer £79,000 as I did think she would've taken it... but I became nervous about the state of the whole house now I knew things hadn't been done properly.... and that didn't even have a Tenant!

You don't need professional help for this... but you mustn't risk becoming a distressed seller just because you can't handle ending the tenancy for your long-term Tenant. Maybe it's better to get vacant possession, tidy up the house, make it attractive for a wider audience? Food for thought.

Thank you Handyman and Hippogriff, definitely food for thought. Although I really wish I could wind the clock forward and just be done with all this, as you say I need to get things right to avoid losing a lot of money. It would be really nice if I got a good sum of money for the house, and the tenant got to stay, but life isn't always that simple is it! Will mull it over and think what to do next.
Thanks again for your help, it's really good to be able to get other people's opinions.

Check out the Vesta website, they sell tenanted properties to other landlords with tenants in situ. Could be a good option for you.