Tenant has changed his mind at the last minute, and will not proceed....what now?

[Earlybird]

I have a dilemma and need advice please.

We are currently living out of the country, and have looked to rent our flat. On estate agent's advice, we did a complete renovation / refurb (new kitchen, new carpets, new boiler, updated bathrooms, etc). After months on the market and two price drops, we finally received an offer (we were told Brexit uncertainty has caused the market to slow dramatically).

The tenant was due to take possession at midnight tonight, but i've just been informed that he is pulling out due to a family health emergency in another country. He had not signed the lease, so I am told that all he will forfeit is one week's rent.

While I am sorry he has had a crisis, I am extremely upset at this turn of events. The flat has been off the market / sitting empty for 6 weeks since the lease was agreed. I am astonished that he had not signed the lease, though the estate agent advises that people often don't sign until the day before.

The estate agent is extremely sorry, but says the only thing to be done is for the flat to go back on the market.

What, if anything, would you advise? I am upset and frustrated.

There's nothing you can do - no legal redress.

Re-advertise and start again is the only way.

You need to put it back on the market.

I did this once. It was because the leggings agent was massively condescending and rude to us so we found somewhere else and told them on the day I was due to sign and pay.

Hi OP. Sorry this has happened, it must be immensely frustrating.

Unfortunately I'm not sure there actually is anything you can do except put the flat back on the market.

Are you happy the ea is doing their job properly?
It seems odd that the TA wasn't signed until so late in the day.

Is the rent on par with other properties in the area? If there's a lot of competition, brand new fittings will not necessarily push prices up.

Good luck and hope it works out for you

I've never signed a lease until the LL/agent was standing ready to hand me the keys. If he was due to take possession at midnight tonight I wouldn't expect a signed lease a minute before midnight.

Thanks for replies.

I think the EA is doing their job properly. They are a reputable firm recommended by a friend who has used them for years.

The flat is lovely and in pristine condition - top floor with lift, zone 1, portered block, close to transport, etc., so should be desirable. It is competitively priced based on other properties in the area listed on Rightmove.

EA says there are many more people 'on their books' looking for property than earlier in the year, so I guess that is a positive.

While waiting for the tenancy to begin, I have incurred 6 weeks of expenses which is only one reason why I am frustrated that he can change his mind / walk away less than 12 hours before the tenancy was due to begin.

If you haven't accounted for a 6 week void period then you haven't planned properly to be a landlord. You will have periods when your flat is empty. You have to account for it when considering finances. If you can't afford it, or it's going to piss you off every time the place is empty and you're having to cover the bills yourself then maybe being a LL isn't for you.

BandeauSally - the flat has been empty much longer than 6 weeks. In fact, it has been empty closer to 6 months.

The flat was taken off the market 6 weeks ago based on the tenant's offer and our agreement. While the flat was off the market, I incurred costs based on his requested tenancy start date. In addition to the mortgage and utility payments, there have been credit checks, an inventory clerk visit, contractual paperwork going back and forth, etc.

All costs of being a LL. the credit check will have been payable even If it turned out he wasn't eligible for the flat. Business costs money to run. You are running a business. If you want to avoid this in future then you will have to stipulate that a lease is signed before you incurr all those costs apart from credit check) but it will put a lot of people off. I wouldn't sign any lease until the keys were sitting right beside me.

Interesting that a few of you say you wouldn't sign the lease until you had the keys in your hand....why is that? Is it wanting to keep your options open? A lack of trust in the process and/or landlords in general?

I would think if you've seen a flat via an established/reputable EA, and agreed a tenancy, then there is less reason to act so cautiously? Or am I being naive?

A lack of trust in the process and/or landlords in general?

This for me. I've been screwed over a couple of times. Promised things that never materialised. All agencies. The best experiences I have had were with a private landlord letting it themselves. No messing around with "we'll email the landlord regarding this issue" or waiting for a response on an urgent situation until Monday because the agency was closed over the weekend.

final lease signing and key handover happen on the same day for all manner of reasons. There's also a ton of other paperwork for the tenant to be given and to sign that they have been given - and some of that legally cannot be done until tenancy start day.

Sorry Op, them's the breaks. Sounds like you need to drop the rent, these voids are costing you a lot more than holding out for a higher rent. And yes, if you can't afford voids you need to sell it.

You are being naive I'm afraid.

You don't sign the lease until you have the keys because that's what happens. It makes sense.

Why do it any other way?

And you always need to be cautious with estate/letting agents, they're generally not massively honest reliable.

As others have said, it's all part of being a LL. You need to plan for voids and other problems like this.

Being a LL, even with an agent, is not all plain sailing.

you could sell instead?

OP. I have been in your position (expat landlord, zone 1, marketing in a downturn). I used a good agency and paid through the nose for it. I was very happy to do so.

The flat was taken off the market 6 weeks ago based on the tenant's offer and our agreement. and I am astonished that he had not signed the lease are your problems.

Whatever happens elsewhere in the UK, It is not normal for central London to delay signing the lease for anything like this long (unless it's an absolute dive...your post suggests that's not the case). It is absolutely bizarre for an estate agent - knowing that the current rental market for z1 is again stagnant - to have taken this flat off the market before the agreement was signed. And you should have been connected to the process each step of the way. With no surprises.

Some of the biggest EA names in z1 London are an utter disgrace. This one has shown they simply don't act in your interests IMHO. I was incredibly lucky and bought/let/sold with the same agent over 10 years because they did a good job, but even we had our moments of friction! Hope it works out for you OK.

Luckily, we can afford to wait until another tenant is found. I am mostly just disappointed that the flat has been off the market for 6 weeks as we complied with his schedule. He has walked away with less than 12 hours notice, and now we are starting over again completely.

Is there anything I should do in future to protect myself against another last minute withdrawal? I proceeded on the principal that the agreed deal would go ahead. What else could I (or EA) have done to protect my interests?

I'd suggest the following:

1. ensure the EA communicates with you so that you understand the risks of your situation at each point in the process, particularly if you are a new landlord
2. tell EA/prospective tenant the that they are expected to sign agreement within 7 days, giving ample time for your EA to do any credit checks required, else holding agreement will expire and deposit retained
3. tell EA that you expect that if the contract is not signed 7 days after taking holding deposit and credit checks cleared, you want it back on market immediately and full viewing schedule to proceed until signed contract is received
4. Ask EA what the best market price is to close a contract within 14 days, 30 days etc
5. Ask if they do a short term letting service if that price (4) is significantly below that which you want to let it out for on a 12m AST (if any applicable mortgage provider allows that)
6. Tell them you want phone call updates every 48 hours until a signature is obtained
7. Tell them that in the event of a good prospective tenant showing up, they should ignore all time zones and phone you immediately to discuss with a view to nailing a signed deal ASAP
8. Give them 30 days to get a signed deal if you need it filled in 30 days. Work with the market (price drop if you have to), however unpalatable that may feel...I had to stomach a 20% price drop in the throes of the financial crisis to get a good tenant in fast. It was worth it!
9. If you don't have a signed contract in 30 days then I would recommend switching agents ASAP.

That's all I can think of for now. I feel for you OP, it's particularly tough managing this when you're out of the country. I hope these ideas help a little bit and it all works out for you.

RebelAllianceUK - thank you for your advice and sympathy. I will be the first to admit that I am not an experienced Landlord - hence hiring a reputable (and expensive) EA to mange the process on my behalf. I am interested to read your comments about a last-minute lease signing being very unusual for London.

Of course, people can change their minds or have a real-life development that causes their plans to change. But once there is a deal agreed, and a written offer received, I am astonished that someone can simply walk away with no penalty or without forfeiting something.

If there is no penalty, what is to stop people simply changing their minds for arbitrary reasons?

Nothing except loss of that weeks rent.

Lesson is also to assume your agents are bone idle until proved otherwise! You need to chase and supervise every step. Price bears no relation to service.

Believe me - I have not sat back. I have chased and chased. I have spoken to them 2-3 times per week since the beginning, and sometimes multiple times in a day.

However, I have not spoken to them very much since the deal was agreed with the tenant. Perhaps it was foolish of me. I assumed it was down to them to do all paperwork and my role consisted mostly of signing things and waiting for the tenancy start date.

I'm getting the impression that a letting agent is in the business of making things as stressful and expensive as possible for the 2 parties which it purports to be helping!

Is there landlords insurance? Something to cover you for the periods it's empty?

You're welcome. It's central London where last-minute lease signing is uncommon to my knowledge (I can't speak for anywhere else within London). And the penalties for mind-changing can be there...but only if your EA manages this point. If they accept someone's word, accept just a week's rent to hold it, and don't follow up for 6 whole weeks whilst keeping it off the market....mad!....you were absolutely right to be astonished!

I have a feeling your EA is treating you like an "out-of-sight-out-of-mind" expat landlord because they know you can't storm into the office and make a fuss (that's why insisting on daily/48 hourly phone reports really help).

They way you've described the situation, 0% blame lies with the tenant....they never agreed to the lease contract, paid up all little that was required of them and did everything by the book. And that book was written by your EA.