How do you deal with difficult tenants?
This must be the question that I am asked most often by landlords.
The answer depends, of course, on why the landlord thinks the tenant is being difficult but the most common scenario I see concerns individuals or companies that have gone into occupation of a property without a written tenancy, usually because the parties thought it was unnecessary or because it wasn’t ready in time. In some cases, this means that the tenant has had use of the property for months, sometimes years, without the proper documentation being in place. This is fine whilst the relationship between landlord and tenant is a good one.
In most cases of this type the outcome is not going to be good for the landlord. This is because, whether there is a written lease or not, a tenant who has been in exclusive occupation of a property for more than six months, if there was no fixed term, or for more than twelve months if there have been one or more fixed-term tenancies granted, will acquire protection under the Landlord and Tenant Act 1954 (“the Act”).
So, what does acquiring protection mean for the landlord? It means in a nutshell that the landlord must go through a statutory procedure to obtain its property back? The statutory procedure starts with the service of a notice. This notice must specify a date that is not less than six months but not more than twelve months’ in the future and no earlier than the expiry of any fixed term. The notice is not a notice to quit. It is a notice that says to the tenant that its landlord is bringing its current tenancy to an end on the date that is specified in the notice and either it is opposed to the granting of a new tenancy in its place or it will grant a tenancy but only on certain terms.
The advantage for a landlord in the latter scenario is that finally there will be a written lease for both parties to refer to in the event of another problem arising, but what about the landlord who wants its property back. In this case the landlord will have to specify and successfully make out one of 7 grounds set out in the Act. These cover matters such as disrepair and rental arrears but the most commonly used grounds are those based on the landlord needing the property back, either because it wants to redevelop it, or occupy it itself. The landlord can only however rely on the latter ground if it has been the landlord of the property for at least five years. This period is calculated backwards from the date given in the notice.
Where a tenant is leaving because it has received a notice that relies on either of these grounds, or a further ground set out in the Act which concerns sub-letting, a landlord will have to pay compensation to the outgoing tenant of up to twice the rateable value of the property.
If the parties can’t agree the terms of a new lease or that the tenant should leave, then as long as the tenant applies to the court before the termination date given in the notice, or any later date agreed in writing between the landlord and tenant, then it will be entitled to ask the court to decide whether it can stay, and if so, what the terms of its lease should be.
My advice to any landlord finding itself in this situation is to re-establish a dialogue with the tenant and if needs be, offer a financial incentive for them to leave. That incentive may be letting them off rent that should have been paid but hasn’t been or simply agreeing to pay them compensation that they wouldn’t otherwise be entitled to. This will often be cheaper than the costs of going through the court to resolve the issue. A landlord seeking to agree that a tenant leaves voluntarily will have to be careful not to be seen as being heavy-handed. It should also ensure that any agreement is premised on the basis that any sums are only paid either on a formal surrender being documented or when the tenant hands back the keys.
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