can a tenant gain a financial interest in a property by improving it?

[badbridesmaid]

My sister, who can be naive, has rented a small house to the same woman for over a decade. Over that time the tenant has made some substantial improvements to the house- most noticeably converting the attic to another bedroom, but also fitting a new bathroom and landscaping the garden. The tenant's explanation was that she felt at home in the house and preferred to improve it rather than move to a larger place. My sister never sought any legal advice about this and everything was agreed informally. Does the tenant now have a financial interest in the house if my sister sells? Could the tenant force such a sale if she wanted to exercise her financial interest?

Thanks.

The tenant is a bit of a fool, your sister could evict her with two months notice and rent it to someone else at a higher rent. Presuming obviously a normal tenancy etc. your sister could even take off the deposit for repairing any 'damage' (which could include things that are actually improvements) if the tenant hasn't been mega careful.

Who has paid for the improvements?

There are issues also surrounding converting attic to a bedroom, wax a buildings regulations certificate obtained for this.
There are certain types of lease usually called a repairing lease where if the tenant makes a substantial improvement and then leaves before a certain time thy can be paid for the improvement. These usually occur where residential and commercial property are rented together such as farms etc.
Your sister would probably do well to obtain some advice from a solicitor specialising in property law.

The tenant paid for all the improvement s, saying that she had money to spare and wanted more space without moving.

Thanks, I will encourage my sister to seek legal advice, I don't think it even occurred to her.

Does your sister want to sell? The woman sounds the ideal (mad!) tenant!

The short answer is no, the tenant cannot gain a financial interest in the property in the circumstances described. The tenant is foolish to have improved a property she does not own.

Your sister also needs to consider her tax position. Some of the improvements to the property could be taxable on her as "contributions to repairs". She needs to speak to her accountant.

www.hmrc.gov.uk/manuals/pimmanual/PIM1056.htm