What Landlords Should Know About Evictions When Selling Their Properties

There has been a mood change among landlords in recent weeks, where once we were fundamentally an optimistic group many are now becoming very pessimistic, and the media aren’t helping.

I know that there are some landlords who simply cannot make their rentals stack up anymore and they have very few options but there are others who are panicking and forgetting that residential property to let is a long-term investment but that, like all investments, it will go up and down in value over a period of years as will the cost of borrowing. If we can ride it out, we should, because after the storm the sun will rise on a better private rental sector.

One of Warren Buffets’ wise sayings –

“Be fearful when others are greedy and greedy when others are fearful”

I have been a landlord through the economic down turns, interest rate rises and property crashes of the last 50 years but this time I am fearful for some of my colleagues who adopted a business model which only works when the property market is rising and interest rates are stable. The last decade where these two things have happened have caused many property investors to ignore or not even see the risk that they are taking when they “recycle the deposit”. This means buying a property with a deposit and increasing the value of the property either by changing it from a single let into a multi let (HMO) or developing it. After a period of time the property is re-mortgaged at the increased value releasing some or all of the money used as a deposit and to develop it. It makes financial sense for those who are building a portfolio with a small amount of money to start with BUT it has always made me ‘fearful’ that many of the people who have done this in the last decade couldn’t imagine the interest rates which we are about to face – never mind the 18% rates of the 90’s – and they have no plans about how to ride out the storm, nor a plan B. Nor did they ever imagine that, instead of taking money out of the business, they may need to put money in, in order to prevent losing what they had built up. In other words, they had so little equity in the properties that they own they could not make enough from a sale to pay both the lender and HMRC and they can no longer re-finance, and this is a very dangerous place to be.

EQUITY – one word which describes How to make money in property.

Without equity you haven’t got an investment, you’ve got a liability because there is no exit route.

Any business which depends on constantly increasing the cost to their customers, in order to survive, needs to acknowledge that those customers are also living in an economic crisis where their jobs might not be safe, their living costs have increased, the cost of their debt has increased … in other words they are also living through a storm and may not have the capacity to pay more. It makes me ‘fearful’ when I hear landlords saying, “I will just put the rent up”. That is not a plan it’s a knee jerk reaction and one which may lead to voids, or much worse, rent controls as Labour have promised at their conference.

The Process for Rent Increases

There is no legislation nor regulation to control rent increases in England, at the moment. There is a process from increasing rents which is often overlooked by landlords and there is also a Rent Tribunal to which any tenant can appeal if they feel that the rent increase is too high – something which many landlords are unaware of. We also cannot increase a rent during a fixed term unless there is provision in the contract to do so, nor more than once a year during a Statutory or contractual period.

Procedure for increasing a rent with an existing tenant outside of the fixed term or at the end of the fixed term before signing a new fixed term. Fundamentals which many landlords are unaware of

The end of a fixed term contract is a time when a tenant can leave the property, even without giving notice if they choose, and they cannot be charged rent to cover the notice period from their deposit. It is not a time when a landlord can end the contract either by asking them to leave or by refusing to offer a new fixed term. If the tenant doesn’t end the contract and the landlord wants to the only option is to obtain a court order – I will cover this process next.
Two months’ notice of a rent increase gives a tenant the opportunity to think about it rather than reacting by moving out but one month is the minimum that is required
If the tenancy agreement has a clause which allows for annual rent increases we should always communicate with the tenant at that time, either to say that the rent has been reviewed and will not be increasing or that in line with the contract it will be increasing by £xx . This should include an offer to discuss this if they want to.
Many landlords do not increase rents for several years thinking that they are helping tenants, these landlords are often shocked by the reaction of the tenant when they do increase the rent this is why we must tell them when we aren’t increasing it.
If there is no clause, we should mention that the anniversary of the tenancy is coming up and ….as about
Included in this communication should be a Section 13 Notice

Form_5_-_Eng.docx (live.com)

This includes information for tenants about their legal rights including

“If you do not accept the proposed new rent, and do not wish to discuss it with your landlord, you can refer this notice to the tribunal. You must do this before the starting date of the proposed new rent in paragraph 3 of the notice. You should notify your landlord that you are doing so, otherwise he or she may assume that you have agreed to pay the proposed new rent.”

If a tenant does decide to go to tribunal do not overreact, if the rent that we are proposing is in line with local rents for similar properties the tribunal will sanction it, if it is above they will reduce it to the local level and if its below they will increase it to local level. They have no discretion, and the landlord will not be invited to take part in this process. Tenants may not be comfortable discussing this with us and it is not appropriate for us to ask them to justify why they have gone to tribunal
If you are letting rooms in an HMO and you are proposing a big increase, to cover the increasing costs of utility bills when you offer all inclusive, this may be tricky and you are probably best advised to have a clause in your contract which allows you to review the rent during the fixed term, then renew the tenancies as they expire and wait until they all have the clause and increase the rents for everyone. If you don’t you may find yourself with voids as resentment forces people to move out because they are paying more than others and may even lead to bad behaviour towards a tenant who is paying less because their contract hasn’t renewed yet.

Ending the Tenancy and Regaining Possession of the Property

Sadly there will be some landlords who simply have no option but to sell their rental properties, or in some cases move into them – I will cover that later.

Ending a tenancy is stressful for both the landlord and our tenants and we need to recognize that ending a tenancy when the tenant has been a good tenant may cause resentment. We all know that finding a nice property to rent at a price they can afford is increasingly difficult and where a tenant has lived in the same property for a long time and has felt secure, they may be understandably shocked that they have lost that security and need to go hunting for a new home. This is much worse for a family where there are children in local schools because moving house is one thing but leaving all your friends and moving to a new school mid-term is horrible. If we know other local landlords and we have good tenants everyone wins if you pass them on, there may be people who have just bought in the area or those who are thinking of buying – going to local landlord meetings or posting on Facebook groups to offer a reference to your tenants is a kindness which costs nothing but which is worth the effort. There are also property investors who buy with good tenants in place and that is definitely worth exploring because the sale will be straightforward with no void for either the seller nor the buyer.

In the end if your only option is to sell the property with vacant possession there are several things you need to know.

If you need to evict a tenant plan for 6-9 months from service of notice to the tenant leaving (it can be longer)
If your tenant has not broken any of the terms of your contract you will need to use Section 21 – no Fault eviction process – Unless you are planning to move back into the property which was once your home. This is where the trouble usually begins
The notion that a Section 21 is 2 month’s notice and then the tenant vacates is so far from the truth.
To begin with was the tenant given the ‘qualifying documents’ at the correct time?
Before they move in: the government’s How to Rent Booklet – in hard copy or attached to an email? Was it the latest version at that time?
Did the tenant pay a tenancy deposit at the start of the tenancy? If so, was it protected in a government approved scheme within 30 days of payment? If so was the tenant given the tenant’s documents as prescribed by the scheme? This applies to each time a new tenancy was signed even if it is the same tenant
Is there gas in the property? Was there a valid Gas safety certificate in place at the start of the tenancy and at all times throughout? If so was the tenant given a copy before they moved in and within 28 days of each annual inspection?
Was there a valid Energy Performance Certificate (EPC) in place before the start of the tenancy? If so, was the tenant given a copy before the contract (AST) was signed?

If you cannot answer yes to all the above you probably cannot serve a valid section 21 because if the tenant challenges the notice we must prove that all the above happened, the tenant doesn’t need to prove that it didn’t. Some of these things can be rectified to enable you to use Section 21 but most cannot.

If you can serve a valid section 21 it must be given or sent to your tenant on a prescribed Form 6A All the information and the form is here:

Form_6A_1_Oct_2021.odt (live.com)

Two months’ notice must be given and the tenant cannot be asked to leave before the end of a fixed term. The Notice cannot be served until 4 months of the tenancy have expired and it’s important to have evidence that the tenant was given or sent the notice. Posting at two separate post offices with free proof of posting is acceptable. It is not a good idea to send it needing a signature for receipt. It can be hand delivered or posted through the letter box and if you choose to do this take a person who is not related to you as a witness who can provide a witness statement if needed. Do not use this as an occasion to access the property unless you have sent a notice 24 hours prior by letter or email.

A court order is needed if the tenant fails to leave by the date on the Section 21 Find your local court here:

Find a Court or Tribunal – GOV.UK (find-court-tribunal.service.gov.uk)

Or use accelerated possession by completing the N5B online here:

Form N5B England: Claim possession of a property located wholly in England (accelerated procedure) – GOV.UK (www.gov.uk)

Many tenants will move out before this goes to court to avoid costs and to prevent the need to go to court. If your Section 21 is valid there is no defence, but a tenant might want to ask the court for more time and therefore may ask for a hearing.

Once you have the court order it will be dated with the date that the tenant must move out. If the tenant doesn’t move out by the day following that date you need to ask for a court appointed bailiff or a High Court Bailiff to execute the warrant and remove the tenant. If you intend to use High Court Bailiffs you must ask the judge to grant permission on the day of the hearing.

Find a Certificated Bailiff, High Court Enforcement Officer service – FindaBailiff

If your tenant has broken one or more of the terms of your contract, including not paying the rent in full and on time, or you ever lived in the property as your prime residence before it was let you can use a Section 8 eviction process. You must actually move back into the property as your prime residence otherwise you will face legal action, as recently happened when a tenant became aware that the landlord was offering the property for an increased rent and had not moved back in as he had told the court. You must state the grounds on which you rely and have evidence to prove them. There are different lengths of time between serving the notice on the tenant and asking the court to hear the case. Section 8 must always go to court because the tenant is being accused of something which has put the tenancy in jeopardy and they have the right to defend themselves. The court form is here:

Form_3_1_Oct_2021.odt (live.com)

The guide on how to complete this form, including grounds available and notice times are here. Note that the first 8 grounds are mandatory which means that if the landlord proves them the judge must give him possession. The other grounds are discretionary which allows the judge to decide what action to take and he may or may not grant possession even if you can prove the grounds are valid.

Form 3: guidance notes for landlords and tenants (publishing.service.gov.uk)

I have written this article because, while taking part in many online discussions with both landlords and our tenants, it has become obvious that landlords often have no idea how to legally evict a tenant and its quite shocking how many believe that at the end of the fixed term they can just ask the tenant to leave and even more shocking when they believe that a shortage of available rental properties means that there is no limit to the amount of rent that they can charge!

I realise that those landlords who need to sell often do not want to and don’t feel good about doing it but by being respectful of the impact losing a home has on our tenants we will achieve a better outcome and avoid making a bad situation worse for everyone.