The one strategy that could save buy-to-let landlords’ heartache and expense
Whenever a tenant experiences a change in circumstances, it could affect their relationship with you. Even more importantly, it could affect their ability to pay their rent. Most of the time, they won’t tell you that things have changed for them. They’ll phone you with a dripping tap, but they won’t call to say, “Hey, me and the wife have just split. It’s just me paying the rent now.”
Why do you need to know who lives in your property?
When you let your property to tenants, even though it becomes their home, you still have some legal liabilities. For example, your landlord responsibilities include providing a safe and habitable home for your tenants. If someone trips over a loose carpet and falls down the stairs, you could be sued.
Most tenancy agreements are signed by two people: spouses, partners, or friends. You will have referenced both. Unsurprisingly, the most common change of circumstances is when such a partnership splits.
What happens when one tenant leaves your property?
Its common to make both tenants named on your tenancy agreement severally liable for the rent. It means that irrespective of what their financial circumstances are, each can be chased for the rent. If one leaves and doesn’t let you know, their name will still be on the rental agreement. If the remaining tenant stops paying, or can’t pay, you could pursue the other for the rent.
“That’s great news!” I hear you say. Is it? You’re out of rent for several months, and then have the expensive and time-consuming process of tenant eviction to go through. When it comes to court, you become embroiled in a legal battle about who should have told you about what. What a mess.
If a couple who are renting your property split up and leave the property, you need to know immediately. When you vetted the tenants, you may have established that each could afford half the rent. If one leaves, you have no idea if the rent is affordable for the remaining tenant. That puts you in a risky position.
Woah, a new tenant you didn’t know about!
Another common change in tenancy circumstances is when an existing tenant moves in a new tenant without your knowledge. A single person meets someone in a nightclub, and soon they begin living together, in your buy-to-let property.
Now you’ve got a whole new set of risks. You haven’t vetted the ‘new tenant’. You have no idea about their background, their employment status, or if they have trashed rental properties in the past. You could be harbouring a killer on the run or an illegal immigrant.
Many buy-to-let mortgages include clauses that everyone over the age of 18 living in the property must be named on the tenancy agreement. If you have an unknown tenant living in your property, your investment financing is at risk.
It’s the same with your landlord insurance policy. If your unknown tenant causes damage, you probably won’t be covered.
And what if the original tenant (the one named on the tenancy agreement ) moves out, leaving behind the unknown tenant? A couple of months go by, without rental payment. You start the eviction process, and it’s then that you discover the truth. More legal expense.
What is the best strategy to keep on top of the change of circumstances?
You’ve got all the terms and conditions of the tenancy agreement sorted. It’s watertight. It’s in black and white that the tenant must tell you about a change in circumstances. Unfortunately, this doesn’t mean they will.
They may mean to call and tell you about a new person in the property, but they keep forgetting to do so. The longer this goes on, the less likely they are to make that call.
If a marriage has split, the remaining spouse may feel embarrassed to say anything. They may be hoping their spouse returns. They may simply be nervous about your reaction, and that you may not renew the tenancy when it ends.
So, despite the tenant having a responsibility to let you know of a change in circumstances, the onus is on you to make sure you know. There’s only one way to do this successfully…
You must carry out regular property inspections
Regular property inspections are imperative: They:
- Allow you to stay in touch with your tenants, and monitor the condition of the property
- Provide the opportunity to discover and deal with minor maintenance issues quickly, before they become major repairs
- Help you spot the tell-tale signs of a change in your tenant’s circumstances
If you or your investment property manager aren’t conducting regular property inspections, then you are putting your rental income at risk. You are putting your property at risk. You could be putting your property’s neighbours at risk.
As your investment property manager, one of the services we offer is regular property inspections and update of property inventories. As a buy-to-let investor, you need to be on the ball, understand the laws, rules and regulations, and then go that extra mile to keep your property and your tenants safe. As your investment property manager, this is just part of what we do.