Landlord Blog: Are accidental landlords poised for punishment?

Published: 12/02/2014

In his latest blog Solicitor and Head of GW LET Rob Denman highlights the imminent threat to accidental landlords who are thinking about getting out of the letting market.

“There has been an influx of what we call ‘accidental landlords’ over the last few years; existing homeowners who having experienced difficulties in selling their property opted to rent it out instead. Some embraced their new roles, instantly seeing the benefits of being a landlord while others saw it more as a weight around their neck, another thing to keep on track of in their already busy lives.

“So with all evidence pointing to a market revival it’s no surprise that many accidental landlords are considering selling their previous abode. However from 5 April such a move is likely to come with a significant financial penalty following the planned reduction in the capital gains tax (CGT) gain relief attributable to the last 36 months of ownership being halved to 18 months.

“A financial adviser is much better placed to fully explain the impact of the reduction in the CGT allowance. However experts in the field have indicated this additional tax could ‘easily be thousands of pounds’. As a result landlords may wish to consider selling before the beginning of April and the start of the new tax year.

“So that brings us to the issue of ‘Can you sell a property when tenants still live there?’

“Well choosing to sell your property certainly doesn’t give you the right to evict your tenant! If your tenants have behaved themselves (and by that I mean they haven’t given you sufficient grounds to evict them before the end of their tenancy) then you must serve a Section 21 Notice and give them a minimum of two month’s notice to vacant which expires at the end of the fixed term of their tenancy or a period of their periodic tenancy. (Alternatively, if you do have grounds, then you can serve a Section 8 Notice at any point in their tenancy).

“However this doesn’t stop you putting the property up for sale per se. However there are restrictions surrounding your right to show round prospective buyers. In fact you can only show round buyers if such a clause was included in the original tenancy agreement.

“If you have allowed for this then you must give tenants adequate notice (at least 24 hours). They do however have the right to decline if it is an inconvenient time for them and of course they are under no obligation to ‘tidy up’!

“But say you overcome this, find a buyer and agree a sale before the end of the existing tenancy you have a couple of options – the buyer can step into your shoes and inherit the tenants along with the purchase of the property or you can delay completion until the tenant has vacated.

“Whatever happens, it’s a good idea to be upfront and honest with your tenants. Explain the situation and reassure them that their tenancy will not be affected. That way they are much more likely to be willing to cooperate. You could even offer them first refusal!

“Alternatively you can keep doing what you’re doing and remain in the letting game. I appreciate that the biggest reservations accidental landlords have is dealing the potential issues around renting out property – rents arrears, tenancy deposit disputes, maintenance issues and so forth.

“One option is to employ a letting agent to manage the property on your behalf. Yes they’ll take a cut of the rent but you have to weigh up the price you pay to them against the cost of managing it yourself.

“Or you can keep hold of the reins yourself – after all you’ve done alright so far! And you’ll always have GW LET to come to for support over any legal complications you may encounter.”

Rob DenmanRob Denman is a solicitor and Head of GW LET (Landlord Empowerment Team), specialising in such landlord legal issues as rent arrears, tenant eviction and tenancy deposit disputes. In his spare time Rob enjoys watching football and running. He is currently training for his second half marathon.

Content correct at time of publication

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