Complicated Property Rental Question
Discussion
I co-own a building 50/50 with my sister and my brother in law(sisters husband) has made noises that he wants to rent the building from us for his business.If after a while he cannot/will not pay the rent then where do I stand if I need to take action-it is probable in these circumstances that my sister will side with him and allow him to get away without paying.I would imagine that if I ever needed to take legal action or evict him then I would need my sisters blessing which may not be forthcoming???
I've heard it said that the key rule for landlords is 'don't get friendly with your tenants'. I suspect if and when any problems or issues do occur it is very difficult to raise and resolve them - I suspect with family involved the situation would be even worse. I would be wary about even considering it 
On the other hand, if finances allow could you buy your sister's half or vice-versa?
On the other hand, if finances allow could you buy your sister's half or vice-versa?
Edited by PinkPanther on Wednesday 6th September 20:21
PinkPanther said:
I've heard it said that the key rule for landlords is 'don't get friendly with your tenants'. I suspect if and when any problems or issues do occur it is very difficult to raise and resolve them - I suspect with family involved the situation would be even worse. I would be wary about even considering it
On the other hand, if finances allow could you buy your sister's half or vice-versa?
On the other hand, if finances allow could you buy your sister's half or vice-versa?
Edited by PinkPanther on Wednesday 6th September 20:21
thats the other option and although it would make more sense for her to buy me out I feel that this particular property will go up in value at a decent rate over the next few years because of its location and the fact that investors are favouring commercial properties nowardays(tieing them into pensions,better tax breaks etc)
If your B-i-L were occupying for the purposes of his business and have exclusive possession of the premises then in the absence of any documentation he'll have a secure tenancy under the Landlord and Tenant Act 1954 and you find it VERY difficult to remove him from the premises in the future and may end up paying him compensation just to make him leave. D
If you were to let the property to him you need to have a properly drawn up lease and as part of that lease you need to exclude sections 22-24 of the LTA which give him security of tenure. This isn't a complicated procedure but you really need a solicitor to deal with it for you (expect to pay a minimum of £1500 for the lease and its exclusion from the Act - probably more though).
You and your sister will jointly be "Landlord" and under the lease you will reserve various rights including the right to forfeit etc. if he doesn't pay his rent.
You wouldn't under the lease make any agreement as to whether one of you could act alone to take action but I suppose you could if you wished draw up an agreement between yourself and your sister that says that you have her authority to act alone in matters relating to the property. In reality she aint going to go for that is she?!!
You'd be barking to let him into the premises without any lease in place - the value of the property would be fairly well zero and he, as a secure tenant would have you over a barrel for the future.
In reality granting him an excluded lease is not going to solve all of your problems, it will avoid him getting security which is vital but it won't help you get the rent as your sister will almost certainly refuse to co-operate in any action against him for any rent arrears at might occur so you'll have a right to take action against him but not be able to enforce it.
To me it's a really really poor idea, it seems to be a recipe for disaster.
If you were to let the property to him you need to have a properly drawn up lease and as part of that lease you need to exclude sections 22-24 of the LTA which give him security of tenure. This isn't a complicated procedure but you really need a solicitor to deal with it for you (expect to pay a minimum of £1500 for the lease and its exclusion from the Act - probably more though).
You and your sister will jointly be "Landlord" and under the lease you will reserve various rights including the right to forfeit etc. if he doesn't pay his rent.
You wouldn't under the lease make any agreement as to whether one of you could act alone to take action but I suppose you could if you wished draw up an agreement between yourself and your sister that says that you have her authority to act alone in matters relating to the property. In reality she aint going to go for that is she?!!
You'd be barking to let him into the premises without any lease in place - the value of the property would be fairly well zero and he, as a secure tenant would have you over a barrel for the future.
In reality granting him an excluded lease is not going to solve all of your problems, it will avoid him getting security which is vital but it won't help you get the rent as your sister will almost certainly refuse to co-operate in any action against him for any rent arrears at might occur so you'll have a right to take action against him but not be able to enforce it.
To me it's a really really poor idea, it seems to be a recipe for disaster.
Piglet said:
If you were to let the property to him you need to have a properly drawn up lease and as part of that lease you need to exclude sections 22-24 of the LTA which give him security of tenure. This isn't a complicated procedure but you really need a solicitor to deal with it for you (expect to pay a minimum of £1500 for the lease and its exclusion from the Act - probably more though).
Why should anyone want restrict his rights to a new lease under the 54 Act? One would need a written lease in the first place to avoid arguments about lease term, rent, repairs, services etc. However failure to pay the rent is of course a reason for reclaimimg possession at the lease end under the 54 Act. Albeit it can be corrected by him paying the rent.
Whats wrong with having a secure tenant in a commercial premises? Unlike a residential one you can take action to get him out in the event of breach of lease terms, and at the end of the lease theres a high chance he'll stay and avoid the need for a vacant period, rent free periods etc
chrisgr31 said:
Piglet said:
If you were to let the property to him you need to have a properly drawn up lease and as part of that lease you need to exclude sections 22-24 of the LTA which give him security of tenure. This isn't a complicated procedure but you really need a solicitor to deal with it for you (expect to pay a minimum of £1500 for the lease and its exclusion from the Act - probably more though).
Why should anyone want restrict his rights to a new lease under the 54 Act? One would need a written lease in the first place to avoid arguments about lease term, rent, repairs, services etc. However failure to pay the rent is of course a reason for reclaimimg possession at the lease end under the 54 Act. Albeit it can be corrected by him paying the rent.
Many tenants and landlords now enter into excluded leases, There are lots of reason why either a tenant or a landlord would want a lease that is excluded or non-excluded, I don't deal with the commercial reasons why but I can tell you that the majority of work that I do now is on excluded leases - the majority of which tend to be between 5 and 10 years in duration rather than the old form of secure 25 year leases.
chrisgr31 said:
Whats wrong with having a secure tenant in a commercial premises? Unlike a residential one you can take action to get him out in the event of breach of lease terms, and at the end of the lease theres a high chance he'll stay and avoid the need for a vacant period, rent free periods etc
there's nothing wrong with having a secure tenant with a lease in occupation and a commercial purchaser may well prefer that. Maybe I wasn't clear in my post, there is no need to have an excluded tenancy, a secure tenancy is fine providing it suits the situation and is a decent lease. My concern in the situation above is that the B-i-L will be let into occupation on a "it's OK he's my husband" basis with no lease so no defined rights. To me that would devalue the premises. It was also in response to the suggestion that the OP could operate a break clause - it's not possible to have a landlord's break in a secure lease.
The theory about bringing proceedings against the B-i-L for non payment of rent is fine as a theory, the reality in this case is that as the OP is acting jointly as the landlord with his tenant's wife - what are the chances of her wanting to take action? The other problem of course is that arrears of rent is fairly straightforward for a solvent but difficult tenant to deal with - they pay every now and again at the time when it matters. enough to be a pain in the arse but not enough to get the evicted. If they get it wrong and you get them out they then apply from relief from forfeiture and stuff your chances of reletting for another six months before withdrawing proceedings! However, given the situation the wife will probably refuse to join in any action anyway!
Feel free to offer your own advice - that's what forums are here for
Piglet said:
Feel free to offer your own advice - that's what forums are here for
Seem to recall I have offered my advice somewhere above which was not to rent it to him in the first place!
I was more interested in why you were so insistent on excluding the provisions of the 1954 Act.
To be fair for a Landlord it is probably beneficial to exclude the 1954 Act although there is an argument that an excluded Tenant would pay less rent as they do not have protection.
As a tenant one should always seek the protection of the Act otherwise you have no negotiating ability at the end of the term. I am currently dealing with a case where my client has managed to lose his protection under the Act. The landlord is stating you will pay £x pa which is about £3,000pa or 15% above the open market rental value. So my client has the choice of paying the over the top rent, or moving. Not many businesses want to go through the hassle and cost of moving unless they are moving to larger or smaller premises. If protected by the Act we could at least go to Court or use PACE to come to an alledgedly fair agreement.
I agree that there is a trend to shorter leases, and if a tenant client has a long lease I will always argue on review that the rent should reflect an allowance for the long term. There is no reason why a short lease cannot have protection, and indeed a community association I chair had an annual lease on a community hall protected under the Act. Concessionary rent from the Council of £500pa, they wanted it back for a redevelopment project so compensation based on Rateable Value was payable. A nice little earner!
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