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Should I offer my tenant a temporary rent reduction?


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Hi All

 

I have a long standing tenant who has always paid on time and has kept the property in immaculate condition.

 

Unfortunately her partner left her over Christmas/New Year and she's recently told my letting agent that she is struggling to pay all her bills.  He has had a good discussion with her and provided lots of advice to help her get her finances in order, including partial housing benefit payments.  He has asked me if I'd consider a temporary rent reduction of say £50 to be reviewed in 3 months.

 

Currently

  • Rent is £400 (rentable value now approx. £440)
  • Fees, insurance, mortgage etc. £245
  • Income therefore £155 pcm

 

I'm keen to help her out but need to remember this is also a business.  I'm planning to offer the temporary £50 reduction but with the understanding that if she needs to keep us informed of any changes and give us plenty of notice if she's thinking of leaving.  I'd also like so say that her £400 bond is forfeited after 4 months of reduced rent.

What would you do??

 

 

andy-norman.jpg
The Leeds Meetup takes place on the first Thursday of every month, find out more here
@andyn180

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Hi Andy,

If your tenant is long standing and always kept the property in good order I would definately say take the hit now on the proviso that the rent and the tenants position is reviewed regulary. It may only be short term and it looks like she has raised the issue fairly early and not let it drag on with excuse after excuse. She will appreciate your understanding and it may help in the long run.

 

Also if you have no other tenant in mind you will have advertising costs and a possible void . I would always say stick with a good tenant whereever possible - just keep an eye on it. 

 

I don't know whether you could take the bond after 4 months as it's presumably registered in the bond scheme with strict rules attached.

mark-morris.jpg

The Manchester Meetup takes place on the first Thursday of every month, find out more here

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Hi Andy

 

It really depends on how involved you want to get.

 

If it was me, I would have a meeting with her myself and find out what the specific problems are. As you use a letting agent this would show her that you appreciate her coming forward early in this problem. However your letting agent might not like this (or you might not want to get so closely involved)

 

From this meeting, you should be able to find out If this is something temporary, or if it turns out that without her partner she is not able to afford the place. If the latter, there is only one option.

 

To keep her on would cost you too much, especially as your rent is already below what it could be.

 

Mark's comment on the bond is a valid point.

 

good luck with whatever you decide

MIck

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I have reduced rent once in the past with a tenant that had been made redundant. He was the best tenant I've had, both before and after he was made redundant. In the long run I was not out of pocket and (for the right tenant with the right reason) wouldn't hesitate to do the same thing again.

Trust your instinct.

Sam.

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  • 2 weeks later...

Meet with her to determine exactly what's going on. If you 'think' the reason is acceptable, then I would consider a reduction. But YOU need to understand the situation, NOT the agent telling you.

 

I've done rent reductions before. I've even done rent reductions (like from £780 to £750) without the tenant asking, as a thank you if they have been in for a year with no problems. Might seem crazy, but it works for me as and when needed. I'd rather have the same tenant in long term than lot's of different ones earning slightly more.

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I wouldn't reduce the rent until you have met with her and you fully understand her financial position. If you see her gameplan will mean that she can afford lower payments and you are confident she will once again become a regular payer at the normal levels, then sort out a short term deal with her and keep progress on it with monthly catch ups.

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  • 3 weeks later...

Andy

Have you had the meeting yet?  If so are you able to share how it went?

 

Looking in from the outside, there are a few things that I would note:

 

1.  If you agree to reduce the rent, you cannot claw it back later - as that is not a reduction just a deferment.

2.  If you agree to reduce the rent you or your agent will need to amend the contract (including if there has been a time limit of the reduction) and if you renew the contract you will also have to re-issue the deposit prescribed information form.

3. Taking money out of the deposit can and is done with consent of tenants, but be aware that if the tenant takes it to arbitration it is most unlikely that the deposit scheme will find in your favour as the deposit is not for unpaid rent - it is for meeting damages and excessive wear and tear etc. The law is quite clear on this point and the deposit schemes are quite anal + black & white over what they will allow. Having said that many tenants do agree to using the deposit for shortfalls, mostly because they are probably not au-fait with the laws on deposits.  I have found that grown up rational dialogue and commonsense reasoning has enabled me to achieve amicable agreements on each occasion I have had to do this.  Interestingly the only time I have had issue with the way a deposit scheme has worked was in resolving an issue with one of my son's student landlords with me as guarantor - but that's another story!

 

I agree with the comments on earlier posts - a good tenant who maintains your investment properly is often worth holding on to.  With £40 below your assessed market rent & a further £50 temporary reduction means you are £90 per month short.  One month's void + the additional re-letting costs (tenancy admin fees, inventory etc probably add up significantly and probably equal several months shortfall on the current rent.

 

If you have had the meeting and the tenant has a defined period of trying to get back on track, they are probably decent enough to bow out quietly at the end of the agreed time and go elsewhere of their own volition.  However, if a heavy handed approach is used (and I am fairly certain in this case that it wouldn't), losing the current goodwill of the tenant could cost you dearly in no. or even less rent paid and the spectre of legal action.

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  • 2 weeks later...

I have agreed to reduce the rent by £50pm for three months to give my tenant chance to get things in order. I will not look to recover this from the deposit.

We have decided to keep this informal for now and there's nothing in writing at the moment. After three months I suspect she'll either be in a position to go back to the previous rent or she'll be looking to move out. I'll keep things under review and let you now what happens.

Now dealing with the sudden departure of the tenant from another property. There's always something going on in this investor/landlord business!!!

andy-norman.jpg
The Leeds Meetup takes place on the first Thursday of every month, find out more here
@andyn180

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