To think about kicking out (good) tenants?

[pctmmn]

I've had them for over three years and never missed a payment. But in April they said they were struggling so offered a 1/5th rent discount for three months. When this ended they asked for another three months. It doesn't affect my bottom line has I've taken out a 6 month mortgage holiday and the payments won't increase when they start again as it's added to the term.

I've been able to build up a bit of cash, but one works at a hotel and the other manages a resterant.

Would I be unreasonable to ask them to confirm the full rent needs to be paid for September else I'll give them notice? I really want someone in there paying the full rent and it feels like I'm subbing them right now.

But you won’t be able to get them out till the very end of this year and that’s if they leave willingly. By the time your house is empty and cleaned/repainted etc the rents may well have dropped already and then you end up with tenants on the same rent as this reduced one or possibly lower.

I’ve moved in November before I wouldn’t do it again.

And note the recession announced today, how easy a free e you going to find it to re-let.

I doubt many of the people claiming to be LL actually are.

Why? because they see the value of "good tenants?

This town is dominated by a few big companies and I know they have no plans for more redundancies. They've instead let go of contractors from people I know that work there.

Are none of these workers able to work remotely at least part of the time?

I sub their rent and agree to a large discount

Oh come on, 20% discount whilst pocketing a full mortgage holiday?

They've instead let go of contractors from people I know that work there

Contractors rent properties. They don't live under the desks. It does affect the local market. I'd point out also that companies don't publicise their redundancy plans even to employees until they have no other option. There will be more in the Autumn.

Tesco and all other supermarkets only make a small margin on their food

Your hobby LL business is totally comparable to Tesco. PP are correct in saying if you are on wafer thin profits with one unit you have no resiliance in your business model.

If you were making and selling widgets the primary victim of your poor business planning would be you. When you go into business as a LL you enter a business which directly affects peoples' lives. There is a different level of responsibility.

@pctmmn on what basis is it unlikely that they won’t pay the rent - they are paying the rent.
Anyway this is all our in the sky and way - speak to them about September.

However depending on how much the rent is - I’d be very wary of kicking them on the basis of getting 20% more.

I’m guessing you’ve never suffered bad tenants - they type that move in and refuse to pay rent, trash the house and make you go through the eviction process.

Talk about the politics of envy!

Haha. Nice try, I've been a landlord as well.

@WombatChocolate

Playmysong

But as you as say, the LL will still have to pay their mortgage with increased interest......so in that sense they haven't 'pocketed' the mortgage holiday, because in time, MORE will come from their pocket than if they hadn't taken it.

The reality of what has happened here is the tenant has had lower rent (no plan for the reduction to be paid back) but the Landlord will incur HIGHER costs overall. Yes, they haven't paid the mortgage right now, but overall they will pay more. Therefore, the tenant has gained at the LLs expense.

I'm not saying this is right or wrong, just the reality. Lots of people seem to think the mortgage holiday is a free gift of money to LLs. It isn't. It is a temporary reprieve which costs them more long term.

Some people seem to think that LLs should sub tenants in difficulty because they are usually wealthier people. However, no-one applies this to other sectors of the economy. No-one suggests that Tesco should give less affluent customers free shopping or reduced shopping for a month, because its shareholders can afford it and are using that revenue to pay their mortgages. No one suggests that the window cleaner should clean windows for free if people struggle to pay, during this period, or that Marks and Soencer should give free school uniforms to children of workers who have been furloughed, because they can afford it and the furloughed or redundant workers can't.

There are 2 separate issues here.

One is the question of whether LLs have a duty to supply property to tenants at below market rents, which may well incur losses for them, when a tenant faces financial hardship.
The second is whether it is financially better for a LL to accept lower rent from known, reliable tenants, rather than face the risks of voids and uncertain tenants in a difficult market.

Personally, I think the answer to Q1 is that there is probably a short term responsibility to do this during a crisis such as Covid. However, I think any responsibility in this area is pretty short term and if giving rent discounts is resulting in losses for the landlord, they need to consider that and as long as everything is communicated clearly and compassionately, it would be reasonable to give the 3 months required notice from late August, if all other payment options (such as longer term payment plan) have been explored. It won't be in anyone's interests if the property is repossessed.

With regard to the second question, it may well be better to keep tenants on paying lower rent, in the current climate. This wouldn't normally be the case, but might be now. Some rental income, which may well cover most costs if the landlord might be seen as preferable to a void and then Unknown tenants who might also soon struggle to pay.

Personally I would be keeping the tenants beyond their 6 month rent reduction for a further period of rent reduction, because of the answer to Q2. I would hope to arrange a plan for them to re- pay some of the owed rent beyond the 6 month period, understanding the cost their lower rent has to me. I would hope they could appreciate I had subbed their rent whilst long term needing to pay my full mortgage and more interest, plus my flexibility and would be able to understand why I needed to ask them to do this and see it as reasonable.

In this scenario, most tenants want to pay and feel that having signed up at a certain rent level, they should pay and must pay if they can. I take this view. Some tenants see that if there is any opportunity to pay less, it should be seized, regardless of what they signed up to pay or regardless of ability to pay. There can be wide variations on whether tenants see an agreement with a Lamdlord as something to stick to, or if they think that Landlords are fair game to try and avoid paying rent to. I think some people like to de-humanise Landlords and use the fact they have property as a way to justify avoiding elements of the contract, without feeling it is wrong. I am not talking about the current Covid situation, when clearly lots of people have genuinely been thrown into difficulty, but in usual times, when some tenants will always look for loopholes or ways to escape paying full rent. Unfortunately, lots of people seem to support them in these endeavours, purely on the basis that the Landlord owns property, so seems to deserve it, whilst a tenant without property seems morally entitled to any action to avoid paying rent. There can be a convenient forgetting of the legal and binding agreements which tenants choose to sign up to.

As I said in my post, I know it’s not a free gift. These are difficult times and I think it is morally reprehensible for someone to seek financial help, to boost their savings! Even worse to not extend the same help to their tenants.

My dd and sil are landlords. They rented out their previous house when they moved, instead of selling it in a poor housing market, so not looking to really make money, just pay mortgage and expenses! They have an excellent tenant, who really looks after the house (she is given free reign with decorating, minor improvements etc. and house is probably nicer now, than it was when she moved in), but in return she pays around 20% below going rate.

They took the decision that if she needed help, due to Pandemic, they would grant her a complete rent break and if necessary they would take a mortgage break. This would mean they do lose money, but they keep their excellent tenant! A good tenant is worth far more than a few months rent, plus they thought that this was, morally, the fairest thing to do!

The other issue you may have to keep in mind is that if they have children and you are potentially making them homeless they may not get help from social housing until you've gone right through to eviction.

It's crap but that's how the system works with many local authorities as they won't accept a family as homeless unless the LL has actually gone through the whole process of notice, court and eviction with bailiffs etc

I do feel sorry for these tenants. It will be very difficult for them to rent a new property if one has been furloughed and the other laid off. It is completely possible that they will be unable to rent anything at all and will have to apply for council housing (depending where you are in the country). Please talk to them (not a "note" but a conversation) before threatening eviction. Perhaps there is a way to work together on this.

Sadly, many LLs have learned that this a very naive view. This was exactly what I thought when I first became a LL.

Cause and effect may be the other way around and you may have been unlucky. Deregulation of the rental market has resulted in far too many hobby landlords who want to asset build without the responsbility that comes with making peoples' homes into your business. Squeezing every penny out of tenants has become the common model.

If I look back to the landlords my kids dealt with (as young white collar professionals in "secure" jobs, multiple guarantors, exactly the kind of tenant people want) there were one or two who took the role seriously as a two way contract, the rest were just squeezing the asset for all they could get out of it.

Two of them have also rented in other parts of Europe where landlording as a business is still treated as a long term business and a two way relationship.

So the problem you may have is that where at one time people would assume a shared relationship/responsibility, these days the starting assumption for tenants has to be a LL trying to squeeze an asset. That is a bad model for both sides.

OP, your sentence here is telling:

if they can't afford what they chose to contract themselves into paying it's time to move on

Nobody could have predicted COVID-19. Especially not way back when your tenants signed up for this lease. It has hit the hospitality sector especially hard, which again was impossible to foresee.

You're being a real Scrooge about this. Considering kicking a family out into the street during the worst, scariest time of their life - which was 100% not their fault! - just to gain a few hundred quid more per month, when you're already rich.

I'd have some sympathy for you if they were lazy tenants who'd lost jobs through being irresponsible. But it was a global pandemic.

@LilOldMe

OP, your sentence here is telling:

if they can't afford what they chose to contract themselves into paying it's time to move on

Nobody could have predicted COVID-19. Especially not way back when your tenants signed up for this lease. It has hit the hospitality sector especially hard, which again was impossible to foresee.

You're being a real Scrooge about this. Considering kicking a family out into the street during the worst, scariest time of their life - which was 100% not their fault! - just to gain a few hundred quid more per month, when you're already rich.

I'd have some sympathy for you if they were lazy tenants who'd lost jobs through being irresponsible. But it was a global pandemic.

So you think people shouldn't need to reduce their spending if their income falls?

This is a couple renting a 3 bed.

It's a bit like saying Waitrose should reduce their prices so people that have had a loss of income can still shop there, rather than saying they should switch to Aldi.

This isn't a family with children and I will give a reference that they've always paid what was due as discounts were agreed in advance so they never fell into areas.

I do hope you will reconsider kicking them out. It would be incredibly uncharitable especially considering that one of them has lost his job during the pandemic. There’s no reason to think they won’t get back on their feet soon.

@pctmmn oh god do what you want - but can’t wait to see next years Aibu

“My property has been void for three months, I was getting £1500 a month and now the estate agent said I’ll only get £1200. A new tenant has moved in and the first months rent is already overdue”.

@Toilenstripes

I do hope you will reconsider kicking them out. It would be incredibly uncharitable especially considering that one of them has lost his job during the pandemic. There’s no reason to think they won’t get back on their feet soon.

How can I be charitable with a buisness?

Are you joking about no good reason? The hospitality industry is on its knees and a recovery is not in sight. If anything there's no reason to think they will get back on their feet anytime soon!

So you think people shouldn't need to reduce their spending if their income falls?

Moving house is really expensive.

The hospitality industry is on its knees and a recovery is not in sight.

Ah, so kick them when they're down!

It's 20% for 3 months. How much is that - is it even a grand? Come on. Nobody is this tight.

So you think people shouldn't need to reduce their spending if their income falls?

One has lost their job & the other has been furloughed. They are paying 80% of the rent. Do you not think they may have reduced their spending somewhat?

@LilOldMe

So you think people shouldn't need to reduce their spending if their income falls?

Moving house is really expensive.

Not if it's unfurnished, a few car loads for somewhere local would cost £2-3 in petrol.

I moved 80 odd miles and two men and a van cost me £420, so not that expensive even for a reasonable sized house.

Your use of "subbing them 20%" highlights your lack of understanding of the current situation. There is no set rent that you are entitled to

She has every right to ask for the agreed upon rent. If they can’t pay, they should (and will) find cheaper accommodation since they are already paying 80% of the asked for rent. It’s actually better for them to move now rather than continue to depend on the landlord’s largesse, especially if there’s no prospect of a change in financial circumstances.

Rental growth correlates with income growth - if there's no wage increase and people are losing their jobs, rents will fall because the market cannot support the previous levels

Not necessarily, the local supply in the neighborhood matters too. Her property might be someone else’s ‘downgrade’ from a higher grade property.

In any case, while rents are dropping, there’s no way that rents are dropping as much as 20% in most markets.

It’s a risk though, she has to make that choice. It depends on the local market she is in. She would be foolish indeed to trade 80% for 0 over the rest of the year if the local market doesn’t match her optimism.

@LilOldMe

The hospitality industry is on its knees and a recovery is not in sight.

Ah, so kick them when they're down!

It's 20% for 3 months. How much is that - is it even a grand? Come on. Nobody is this tight.

I've already given 6 months

It won't be "a few car loads" if it's a 3-bed house that two people have lived in for 3 years. And unfurnished means they'll have even more stuff to move. Wardrobes? Sofa? Beds?

Plus deposit.
Plus rent upfront.
Plus agency fees.

Even if they pass the credit and employment checks, which they probably won't.

@UsedUpUsername

Your use of "subbing them 20%" highlights your lack of understanding of the current situation. There is no set rent that you are entitled to

She has every right to ask for the agreed upon rent. If they can’t pay, they should (and will) find cheaper accommodation since they are already paying 80% of the asked for rent. It’s actually better for them to move now rather than continue to depend on the landlord’s largesse, especially if there’s no prospect of a change in financial circumstances.

Rental growth correlates with income growth - if there's no wage increase and people are losing their jobs, rents will fall because the market cannot support the previous levels

Not necessarily, the local supply in the neighborhood matters too. Her property might be someone else’s ‘downgrade’ from a higher grade property.

In any case, while rents are dropping, there’s no way that rents are dropping as much as 20% in most markets.

It’s a risk though, she has to make that choice. It depends on the local market she is in. She would be foolish indeed to trade 80% for 0 over the rest of the year if the local market doesn’t match her optimism.

Thank you, that's exactly my thinking it maybe a good downgrade for other people. Is a smaller property in a fab area.

Sorry I mean furnished!