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Managing The Let (Continued)

Inventory Check Out – in order to ensure the smooth check out for both yourself and the tenants, a simple documented process should be pre-agreed by both parties. It helps sets the expectations of your tenant's if you send a letter a few weeks beforehand explaining the process, reminding them that any small items that may have been broken, must be replaced and outlining the process for the return of their deposit. In addition, you should politely mention that the before any deposit is paid back to the tenant's, the property must be cleaned as left as it was entered and that all utility companies must be contacted, final bills requested, paid and copies forwarded

Helpful Hints - the tenants will be naturally concerned about getting their deposit back without any deductions. You will be worried about the potential cleanliness and general state of the property and any damage or dilapidations (above wear and tear) that will mean deducting monies from the tenants deposit, before returning it to the tenants. In most situations, there are usually only minor deductions for dilapidations. Some, helpful guidelines in the inventory checking out process (that should help to reduce stress on both sides) are:-

Complete Written Report - bring your original inventory (used to check the tenants in at the beginning of the tenancy). Capture the tenants forwarding address to forward mail i.e. utility company correspondence. Note all final utility meter readings – gas, electricity, water (if metered). Get the tenants to sign the inventory check out form to agree to the status of the property.

No Deductions Needed - if you are satisfied with the state of the property and feel no deductions should be made, tell your tenants straight away that you will be returning their deposit in full – this will put their minds at ease. Use this as a polite opportunity to remind them that copies of final utility bills should be returned to you with their forwarding address on, before you can release their deposit. The last thing you want are utility companies chasing for non-payment of bills just because your tenant(s) forgot to pay their final utility bills.

Deductions for Minor Dilapidations - if you are not satisfied and damage or breakages will mean you having to deduct monies from the tenants deposit, comment on this during the meeting and explain you will confirm in writing ASAP the exact amount to repair the damage, clean etc. As with the check in, record any damage on camera or camcorder, on your own, (in case the tenant formally disputes the amount of money deducted from their deposit to cover the damage). To calculate the cost of replacement for small items that have been broken, simply use a “new for old” method. For more expensive items like a dishwasher, this new for old method of calculating deduction is unfair, as you are claiming fair wear and tear, and a dishwasher may be two years old. If it had a life of 5 years, then you should only deduct two fifths of the new replacement cost.

Deductions for Serious Dilapidations - if the damage is larger than the deposit i.e. there is a serious problem, you will need to start legal proceedings (see section 8.7) to recover the costs you will have to incur. Disputes of this nature tend to favour the tenant – especially if you did not employed a third party inventory clerk to make a reasonable, unbiased judgment.

Use an Independent Inventory Clerk - use an independent third party inventory clerk to perform all of the above in order to avoid squabbles about the condition of items and consequent amount of deductions. Te National Tenancy Deposit Scheme (available through the ARLA), aims to act as independent ombudsmen to assist landlords and tenants during the tenancy with deposit, deductions from deposits and disputes about these. It offers two options to resolve disputes between landlords and tenants:-

Firstly, the custodial option where the tenants money is secure in a third party ombudsmen’s bank account; if there is a dispute he decides what should be deducted for dilapidations.
Secondly, the insured option is available where the tenant has the backing of a large insurer who repays the deposit (minus deductions for dilapidations) based on the value set by the ombudsmen. The scheme has impartiality and therefore high credibility on both sides
Return Deposit - conclude the entire inventory process in a timely fashion so that the full or remaining balance of the deposit is returned within 30 days.
Re-Letting - remember to advertise the property a couple of weeks before the checkout date to eliminate void periods for getting new tenants in – this should form a clause in the original tenancy agreement.
Return of Keys – make sure all keys are returned as per the original inventory check in, as this marks the end of the tenancy.

Termination of AST - there may come an unscheduled point, well before the check out process, when you decide you want to sell the property and therefore need to give your tenant(s) written notice “by forfeiture”. You need a basic awareness of the law (provided below) and also need to speak to a solicitor to gain professional and comprehensive advice, support and to take responsibility to implement the legal processes. The main termination scenarios under the Assured Tenancy Agreement (AST) are as follows:-

Termination By Landlord - you must give your tenants written notice (use recorded delivery); this must be done in accordance with the tenancy agreement and statutory regulations. For a short-term tenancy agreement you will only be entitled to regain possession at the end of the fixed term, providing you have served the required notices (see below), or if the tenant gives you written agreement they are happy to leave. For these “fixed term” contracts, the tenancy can only be terminated at the end of the fixed term. Without a release, clause the tenancy agreement can only be ended when both parties are agreed. If you are using a letting agent, they will usually have the authority to serve the ‘Notice to Quit’ on your behalf. Notice needs to be served in writing in one of the following two ways:- Housing Act 1988 Section 21(1) - this notice can be served at any time during the fixed term. If served in the last two months of the tenancy period the tenant(s) must leave the property (2 months after the date of serving). Housing Act 1988 Section 21(4) - this two month notice must be served if the fixed term tenancy has already expired.  Early Termination By Tenant – that may come a point that the tenant wants to leave for personal reasons before the fixed term has ended i.e. to move towards a new job in another geographic area. In this situation, your tenant is still legally obliged to pay you the full rent for remainder of the fixed term. If they request to leave, through written “surrender” notice, before the end of the fixed term (typically six months), waiving outstanding rental commitments will be subject only to your good will.

Renewal – there may come to a point where the end of the fixed term AST is about to expire and either you or your tenant or both wishes to renew the contract:-

Renewal of Fixed Term (AST) – this option is where both you and your tenant choose to extend the fixed term of the AST (for example for another six months), at the end of the term. Your solicitor who will draft a replacement to the fixed term AST can easily implement this. This is an ideal situation with no disputes or complications.

Renewal by Periodic Tenancy - if you are in a situation where you might plan to regain possession in the coming months (but the AST is about to expire), you and the tenant don’t want the restriction of another six month contract, then you can, by mutual agreement, let your original AST expire, so that both you and your tenant are now bound by a ‘period tenancy’. A renewal by periodic tenancy is based on either a contractual or statutory basis – it means you both can give two months notice at any point (and don’t have to wait until the end of any fixed term, which has now lapsed). All other terms in the original AST remain in force and carry on (even though there is no written agreement).

In legal paperwork terms, it is a do nothing option. The downsides for you are that; you cannot increase the rent unless pre-agreed by formulae in your original AST; also your tenant is quite within their rights to leave after two months notice leaving you with a potential void situation – they must give four weeks written notice that this is their intention. The upside is that both you and the tenant can part company for whatever reason, in a relatively short timeframe.

Early Termination Due to Breach – if the tenant breaks conditions of the AST, e.g. stops paying the rent (for two months or more), you can initiate court proceedings to regain possession. In practice, you should ask your tenant for the rent areas – there may be unforeseen circumstances, which have delayed the rent even though the tenant assumed everything was fine – perhaps the bank cancelled the direct debit by mistake. Always check with the tenant. However, if the tenant refuses to or cannot pay the rent, you must take action quickly. Other examples of breaches of the AST might be:-

Failing to leave once the tenancy term has already expired Serious damage or theft to your property and its contents Undertaking unauthorized repairs Causing a nuisance to neighbors i.e. consistently playing loud music

Serving Notices (Grounds for Possession) – you must serve your tenant(s) with the correct legal paperwork of your intention to regain possession before you can actually go to court. If the breach relates to failure to pay rent, the tenant will still be liable for the remaining rent within the fixed term period. Serving notice in this case involves serving a Section 8 notice (two months late rent), under the Housing Act. It is also advisable to serve other grounds too including; Section 10 (tenant was behind with their rent both when you served notice seeking possession and when you began court proceedings) and Section 11 (tenant was not behind with his or her rent when you started possession proceedings, he or she has been persistently late in paying the rent).

You must serve the order on all tenant(s) individually. If the tenants are married you should address the Notice to both of them. Make sure you use recorded delivery and obtain a third party independent witness to verify your actions in case the tenant disputes ever receiving any written notification. Hopefully, this formal warning will result in any rent arrears being paid. However, if your tenant(s) refuses to pay back rent and/or leave after fourteen days of you serving the notice period, you can then go to Court and apply for a “Possession Order”…

Accelerated Possession Order - in the case of a tenant who has failed to meet his rental commitments or refuses to leave at the end of a notice period, i.e. they have breached their tenancy agreement, you may apply to your local County Court for what is known as an Accelerated Possession Order. This may mean you may not have to physically go to court – the court will decide based on the legal documents submitted. You must devolve responsibility for exercising this order to your solicitor. Give your solicitor copies of the original tenancy agreement, termination notices and all letters and correspondence so that they can check you have a winnable case for Accelerated Possession Order.

Following your application to the court, the tenant will be notified in writing, that you have applied for possession. If the court entitles you to possession, they will write a notice to the tenant, giving them a move out date. The court may order an ‘absolute possession order’ which basically means it will be mandatory for your tenant to leave. Alternatively, the court may orders possession on discretionary grounds – known as a ‘suspended possession order’. As long as your tenant meets the conditions (typically paying all back rent), they can stay in the property.

If the order is absolute and the tenant still refuses to move out you can apply for an Eviction Order. If successful with this order, the court will arrange for bailiffs to forcibly evict the tenant. Inevitably, this whole process in reliant on the speed of the legal system and your solicitor.

Harassment - the Protection from Eviction Act 1997 is designed to protect the tenant(s) from illegal eviction – this may arise if you do not follow the above procedures with regard to regaining accelerated possession… It is a criminal offence to evict a tenant classified as a "residential occupier" without visiting court to obtain a court order to do so. In addition, you cannot start court proceedings until your formal notice period has expired. The tenant has the right to take you to court under the Housing Act 1988 if they believe they are being “harassed” and also may be entitled to sue you for damages under common law. Harassment occurs if a landlord is trying to unlawfully remove the tenant from their home i.e. through cutting off utility services or sending threatening or intimidating letters. Another example of harassment is if a landlord charges their tenant for repairs that are very expensive or left incomplete.

A landlord that is found guilty of harassment could face a prison sentence of up to six months and/ or a fine of £5,000. In addition, the court will determine the amount of damages the tenants receives (applied through either Tort law, The Housing Act or case law) for the breach of the contract, will be equal to the estimated profit the landlord would generate from the illegal eviction, (had he been successful).

Further Reading

Landlord Action - specialists in the recovery of rent and property from bad tenants http://www.landlordaction.co.uk
Association of Relocation Agents - the professional body for the Relocation and Homesearch Industry in the U.K. and Europe Association of Independent Inventory Clerks (AIIC) - aims to ensure that every landlord, tenant, and agent understands the importance of the inventory process and the value of instructing an independent and professional Inventory Clerk. http://www.aiic.uk.com
Tenancy Deposit Scheme – aims to be independent ombudsmen to assist landlords and tenants during the tenancy with disputes surrounding deposits and deductions http://www.ihos.org.uk/tds