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Managing a rent reduction
Posted by Catherine Deshayes on Friday, May 29, 2009
It's a sign of the times that we should be talking about how landlords should go about reducing their tenants' rent...
Over the last couple of years most landlords have faced the
opposite challenge of ensuring that they do not get behind the market rent by
instigating regular rent increases.
However, rising unemployment amongst tenants and a general deterioration in the
economic environment are resulting in some tenants having to take a pay
cut.
The fall out from this is that a tenant will then approach a landlord to either ask for a rent reduction or to give notice that they need to move to a cheaper property.
This has meant that many landlords are moving into
un-chartered territory. How do they reduce their tenant's rent?
Avoiding rent reductions
Firstly, a landlord should always where possible try and avoid giving a rent
reduction. This can be done by offering the tenant improved accommodation
thereby encouraging them to stay by making them feel that they are getting better
value for money.
Obvious additions to a rental property that will appeal to tenants are
improvements to media facilities such as a WIFI network or digital TV.
These ‘extras' can often be added to a property at
relatively little cost. A couple of hundred pounds for a router or new
aerial to enable the tenants to receive these services might be all that is
needed.
These one off cost to a landlord could ensure that the tenant stays and doesn't
go down the road looking for a better deal.
Landlords need to keep on top of rental property maintenance
The other thing that landlords should ensure is that they keep on top of
property maintenance.
It's no good promising to upgrade the fridge freezer, redecorate the lounge or replace the tatty carpet if you don't actually deliver.
In the current climate landlords may well find that at the
end of the tenancy the tenant just presents you with a choice of granting a
large rent reduction or they will simply move to an apartments or property
where the landlord has maintained their property more effectively.
Mechanism of reducing rent
The means by which a landlord actually instigates a rent reduction are varied
and will depend on the circumstances of the tenancy.
The most obvious way to do it one would think would be to issue a section
13 notice - in the case of periodic tenancies, increasing the rent is
slightly more complicated because the landlord will need to go through the
formal procedure as set out in section 13 of the Housing Act 1988.
However the section 13 notice can only be used by landlords to increase the
rent.
It is not possible either to just grant a rent reduction verbally or even in a
letter because both would be unenforceable because of the lack of contractual
consideration.
The only sure ways to reduce rent are:
Creating a new tenancy agreement at the reduced rent; or Deed of Variation
(because anything embodied in a Deed circumvents the 'lack of contractual consideration'
problem).
For most landlords the easiest solution is to grant a new tenancy. The
complication to this arises is if the tenant is behind on their rent.
This is because by granting a new tenancy the arrears will
become a ‘former tenant' debt and so cannot be used as a formal ground for
possession in relation to the new tenancy.
The only way around this is to insert a rather technical clause in the tenancy
agreement making the repayment of any former arrears a condition of the new
tenancy agreement. The other way is to get the tenant to sign a deed.
The simplest and most advisable method is to require the tenant to bring their
rental account up to date before revising the agreement.
Taking a rent reduction is never a good feeling but it may be a function of
these ‘tough times'. The one thing we would say is LESS rent is better
than NO rent. Landlords should avoid a void at all costs.
Written by Property Hawk
Picture by asterico
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