Wwyd - evicting tenant?

[DexyMidnight]

Canvassing opinions. Took on self employed tenants in March. They were ideal and seemed mature, responsible, sensible etc. They did however fail their credit check due to their irregular earnings and fact that they didn't have the requisite 3 years' statements. They were keen to proceed and we agreed, with a 3 month deposit.

I am thinking ahead here to March. Obviously we must refund their excess deposit under the new legislation - we have until next summer to do this. My intention was to deal with it in March when the tenancy ends or renews.

At the 6 month check up recently the tenants asked what our intentions are for next year, they're keen to stay etc. The property is in fair condition and they have paid their rent on time with one minor exception which they (i think honestly) blamed on the bank holiday.

Obviously by March next year one or both of them could be employed ft in a job earning £50k p.a. and easily pass a new credit check, their business could have taken them overseas - who knows. As I said I'm just thinking ahead and canvassing opinion.

Assuming no change and they fail the credit check again next year (ie no rent guarantee insurance)... Wwyd? Give them notice and look for a new tenant who would pass the credit check?

I self manage so no agents fees for finding a new tenant etc and I'm confident the house would relet quickly as it's in catchment for the grammar schools and the primaries are decent.

Oh p.s. Guarantor a no go - their families are in the US and I'm not interested in trying to enforce a guarantee in a foreign jurisdiction

And exactly WhatTiggerDoBest said. LLs normally only do a credit check before the start of a tenancy. It's very odd indeed to do one part way through.

Taking rent in advance seems pretty common advice from letting agents when letting to international students who have no income and no UK guarantor. As long as there is a separate security deposit that is protected and it is clear that the money is for rent, not a stealth deposit, it is ok. See Johnson v Old:

www.rla.org.uk/landlord/guides/do-you-need-to-protect-advance-payments-of-rent-as-tenancy-deposits.shtml

We have rented several properties over the years, credit check only done when you move in never yearly. Good tenants cam be hard to find so if they are looking after the house amd paying on time why would you evict them?

I don't have rent guarantee insurance because they failed the credit check. But 3 months deposit gave me some (admittedly limited) comfort vis a vis unpaid rent. If I stick with my tenants I will have no insurance and only 5 weeks (not 12) before I incur losses and so it makes 'sense' to advise them they won't be able to stay but it feels tantamount to putting them on the street as I do wonder who will have them in their circumstances now. Probably some dodgy HMO LL.

runoutofnamechange - oh that's interesting. The last time I looked into it was some years ago. I know that it has caused issues but it seems that it is OK. I'd still be wary though.

Credit checks mean nothing tbh. In terms of the way you think they do anyway.
I once dealt with a customer who had a coutts card but couldn’t pass a credit check for a phone contract.

If they’re paying their rent on time, and keeping the house in a good shape, there’s no reason to evict them. You could pass a credit check and still run the house into disrepair.

I think you’re thinking too much into it and making connections that aren’t really validated by much?

Can you not find insurance that will allow you to be covered in this circumstance? There’s tonnes of people who can’t pass a credit check, they can’t exactly be cancelled out of all private tenancies because of it.

LLs normally only do a credit check before the start of a tenancy. It's very odd indeed to do one part way through

I think what the OP means is that they failed the credit check and don't have a UK guarantor so it invalidates her landlord insurance to cover unpaid rent. She agreed to allow them to rent the place with a 3 month deposit as an alternative. Now she has to return the deposit as the law has changed so the maximum deposit is 5/6weeks rent. She doesn't want to renew the contract without insurance or a large deposit. So unless they go through another credit check and pass it, allowing her to get insurance, she is unwilling to let them stay.

Well then maybe they would agree to pay the rent at least three months in advance, as runoutofnamechange suggested. Really the best guarantee you have is past behaviour - and that's been fine! Let the contract become periodic to give you more control by all means. But really if they've been good tenants so far you would be rather silly to evict them in my opinion.

To all those querying a credit check on renewal - you're right there is no need. But in these circumstances there is a 'need' to redo the credit check as since the last one relevant legislation has changed.

However unless my tenants financial position has changed come the new year (such that they then pass a credit check and i can get rent guarantee insurance) then I think I'll need to ask them to leave, as I can't take an increased deposit instead.

But those are only my instincts and I'm looking to canvass views.

OP - what legislation regarding credit checks? There isn't any.

Can you renew them on a month by month basis so that you’re covered quite soon in the event they stop paying their rent?

@htecatneuterer I think the OP means the legislation about security deposits

Yes I mean the legislation on capped deposits.

I agree a credit check is in practical terms a worthless thing (I myself was declined a Debenhams store card once ) but crucially it allows me to get rent guarantee insurance.

It's a computer says no situation.

How do you mean you were covered for 12 weeks rather than 5? Surely if they paid you 3 months then they didn't pay anything else for that 3 months or did you keep the whole lot as a deposit?

It was a deposit vilanelle. And it wasn't ideal as it would have been exhausted early in a what would likely have been a 6 month court process (if it had come to that).

I took a chance on them but the stakes seem a little too high now. What a mess. They seem very decent people.

The change in the deposit law is a massive pita as a landlord. I live in a rented house for work and we’ve rent our house out. My tenants of 12 years never had a credit check as they paid cash up front years ago. I am loath to evict them after all these years, but once they go, with all the changes it’s too much of a pain. I will be selling it.

Are you a member of the Residential Landlord's Association? If you aren't, you can join and get help immediately. They have a helpline that can advise you on having a contract where the final 2 months rent is paid in advance, as well as having a security deposit. That would leave in the same position as now if you are happy with them as tenants otherwise.

This is a direct consequence of the new Tenant Fees Act (2019), presumably. For those who aren't familiar, it limits tenancy deposits to 5 weeks' rent. Before, the OP had 3 months ' deposit and this was sufficient "insurance" for her to take these tenants on despite them not passing credit checks. Now the law stops her from doing this, so this tenancy has become much more risky than it was. If the tenants stop paying she faces the possibility of many months without rental income plus thousands of pounds in fees to try to evict them. That's why it's an issue - they've been good tenants so far but the legislation has removed the OP's safety net.

Here's an article about the Act : blog.openrent.co.uk/tenant-fees-ban-what-landlords-need-to-know/

The article that @runoutofnamechanges posted re paying rent in advance was interesting, but that approach seems complicated (as the article said!). What this new Act has done is made it harder for higher - risk tenants to rent, because the landlord has less security.

Thanks runoutofnamechange I'm not a member but i will look into it. Read your J v O case note with interest but i saw that it was a 2013 CA case. I suspect it's ripe for a re-run, I seem to recall that the new legislation might have caught advance rent but I must read it again. Food for thought.

(x posted with you Eltham mum)

But the new law took effect from
1st June, so doesn't apply to the existing deposit you have from them?

We have a tenant who cannot pass credit checks due to a CCJ several years ago. He pays 6 months rent in advance. There is a separate deposit. The rent gets transferred to us monthly by the agent. He has been the best, most reliable tenant we have ever had, as he knows we took a gamble when no one else would. I would never look to evict a regular paying in situ tenant if they are not causing problems and I don't need the property back.

Do you have to refund the deposit when the fixed term is up? If the tenancy just rolls over to periodic does that not follow the same conditions when it was first signed? I thought the new legislation applied to new tenancies only.

Honestly if they're paying the rent which they are, I don't see what the problem is. Keep them in the property and manage without the insurance, it's such a hassle re letting and of course there is a cost to finding new tenants.