Selling rented property

[GlobalC]

Hi Guys,

Ok so my own house is due to complete in a couple of weeks so its now time to start thinking about my 2 flats, brief run down of them,

• The 2 flats were converted from a single dwelling back in 2008 and have been separated legally
• They are both tenanted with tenants that have been there around 3 years
• 1 tenant is DSS and has always paid on time
• the other tenant is not DSS and is over 2 months in arrears but is making some form of payment just not all!
• The deposits were not put into the deposit protection scheme an the tenants were aware of this from what i remember
• They signed shorthold tenancy agreements at the beginning but I never bothered to get them to sign new ones so they are effectively on month by month tenancies

Having spoke briefly with Plan B on this matter I am looking for advice as to where to start, I want to get them out or sell with them in as quickly as possible any help would be greatly appreciated. The sooner I get shot of the properties the better I will feel knowing that other interested party's ( mum's and friends ) money is secure.

[PlanB]

Re: Selling rented property

Having spoke briefly with Plan B on this matter I am looking for advice as to where to start.

Here I am

First things first. Where are you going to live once you've completed on the sale of your home?

There's a massive tax advantage if you move into one of those flats. At the moment you will have to pay Capital Gains Tax on the difference between what you bought them for and what you sell them for. If you move into one and establish that (utility bills, council tax etc.) then the last three years will be exempt for the purpose of the calculation. I believe that's about to shorten to the last eighteen months from April 1st.

Are they both the same shape and size? The complication being that you bought them as one unit and now they are two units for tax purposes. You can offset the cost of your renovation/development against each one although it may be difficult to separate out the costs between the two.

[PlanB]

Re: Selling rented property

• The 2 flats were converted from a single dwelling back in 2008 and have been separated legally
• They are both tenanted with tenants that have been there around 3 years
• 1 tenant is DSS and has always paid on time
• the other tenant is not DSS and is over 2 months in arrears but is making some form of payment just not all!
• The deposits were not put into the deposit protection scheme an the tenants were aware of this from what i remember
• They signed shorthold tenancy agreements at the beginning but I never bothered to get them to sign new ones so they are effectively on month by month tenancies.

It would make life easier for the pair of us if you called one *Flat A* and the other *Flat B* with separate posts for each because they have different issues progressing at different speeds. One is in rent arrears and the other isn't. There are different legal routes to remove tenants in arrears than a standard recovery of your property if either/both decide to dig in their heels and stay put once you give notice.

What I will say right away is that if the tenants' deposits are not in a Government backed scheme you have no legal right whatsoever to evict them. We'll deal with that issue sooner rather than later once you've separated out the properties into different posts. The DSS one is more likely to notice that you haven't done it because they will probably take advice from a housing department or law centre when it's time to go. You can put the deposits into a scheme retrospectively.

Since these are statutory periodic tenancies they will not be on one month's' notice. The Tenant can give you the Landlord one month's notice, but the Landlord has to give the Tenant two months notice.

Depending on your relationship with the tenants you may be able to negotiate something 'customized' in relation to the end date. This usually entails a rent reduction or write-off as an incentive.

[GlobalC]

Re: Selling rented property

Here I am

First things first. Where are you going to live once you've completed on the sale of your home?

There's a massive tax advantage if you move into one of those flats. At the moment you will have to pay Capital Gains Tax on the difference between what you bought them for and what you sell them for. If you move into one and establish that (utility bills, council tax etc.) then the last three years will be exempt for the purpose of the calculation. I believe that's about to shorten to the last eighteen months from April 1st.

Are they both the same shape and size? The complication being that you bought them as one unit and now they are two units for tax purposes. You can offset the cost of your renovation/development against each one although it may be difficult to separate out the costs between the two.

Hi Plan B

No I won't be moving into one as I have somewhere else to live on the cheap! There won't be an capital gains to pay as they will most likely sell for what i bought them for or less. I bought them off of my old renovating business ( which is why my old business partner essential owns half ) at the time of purchase they were already split into 2 separate dwellings so no issue there! The flats are both one bed but the ground floor is slightly bigger and has the garden. They are lease hold with my ex business partner holds the freehold which is like 997 years remaining!

I literally just want to sell them with as little fuss as possible ( asking a lot I know! )

[GlobalC]

Re: Selling rented property

Flat A

Is the ground floor flat with the DSS tenant in it, she is a lovely old lady and has never caused any problems accept deciding to paint the place herself without my consent. She will be most unhappy if she has to find somewhere else to live as she has stated before that she would like to live there " to the end "

[PlanB]

Re: Selling rented property

There won't be any capital gains to pay as they will most likely sell for what i bought them for or less. I bought them off of my old renovating business ( which is why my old business partner essential owns half ) at the time of purchase they were already split into 2 separate dwellings so no issue there! The flats are both one bed but the ground floor is slightly bigger and has the garden.

Oh good, you can cross that issue (CGT) off your 'To Do' list.

Are both the leases the same length? You may attract a buyer who would want to buy both and convert them back into a single dwelling again. There'a a massive shortage of family housing stock. Or you may find a buyer who wants both in order to live in one and put Granny in the other etc. Owning two flats in one house is definitely a plus for you.

Another thought might be to approach a Housing Association to buy the two flats. These properties sound ideal for that purpose. They may not pay you top dollar but it would certainly be an easy transaction. You never know they may even keep the tenants which would mean you get rent right up until completion day.

[GlobalC]

Re: Selling rented property

Flat B

Is the first floor flat where the tenant is a girl of around early 30's and is in arrears of just over 2 months and keeps missing payments to which we have agreed she has been a bit of a nuisance tenant and calls up with silly requests all the time. She has been in arrears since Oct last year

[GlobalC]

Re: Selling rented property

My main concern right now is getting the tenant in arrears out, so that i can do some work there before putting it on the market. There was a water leak which has stained the walls and ceiling a bit!

The rent from the other flat almost covers the 2 mortgage payments so I wont mind having one vacant for awhile.

I never thought that the housing association might purchase them that would be ideal if the price is right! which could mean the old lady could remain there. But the arrears tenant is not going to entice any prospective buyer so she has to go!

[GlobalC]

Re: Selling rented property

Flat B

Is the first floor flat where the tenant is a girl of around early 30's and is in arrears of just over 2 months and keeps missing payments to which we have agreed she has been a bit of a nuisance tenant and calls up with silly requests all the time. She has been in arrears since Oct last year

I am considering the idea of letting her off the arrears if she agrees to leave, just to get her out!

[PlanB]

Re: Selling rented property

A few more general questions before we set about the flats with different issues.

Do you have mortgages on these flats and are they both with the same lender? Are there any mortgage arrears on the loans because you want to avoid a repossession where you would lose control of the sale? Are the flats in negative equity (I think you've hinted at that) ?

It would be most helpful if you could post up the financial details by editing them into those Flat A and Flat B earlier posts of yours (a bit like an UE Diary on here). If that's awkward you can PM me the details and I won't reveal anything on the forum

[GlobalC]

Re: Selling rented property

Are both the leases the same length? You may attract a buyer who would want to buy both and convert them back into a single dwelling again. There'a a massive shortage of family housing stock. Or you may find a buyer who wants both in order to live in one and put Granny in the other etc. Owning two flats in one house is definitely a plus for you.

The flats are worth more as separate dwellings than what it would be worth if converted back to a single dwelling,

Yes both leases are the same length

[GlobalC]

Re: Selling rented property

Flat A

Ground Floor Flat

Mortgage Provider Birmingham Midshires
Arrears No
Approx value £110000
Oustanding Mortgage £78500
Leasehold Yes
Freehold 997years

This property has the DSS tenant all payments are upto date

[GlobalC]

Re: Selling rented property

Flat B

1st Floor Flat

Mortgage Provider Birmingham Midshires
Arrears No
Approx value £105000
Oustanding Mortgage £76500
Leasehold Yes
Freehold 997years

This property has the standard tenant who is in arrears

[PlanB]

Re: Selling rented property

the arrears tenant is not going to entice any prospective buyer so she has to go!

I agree. Target her first but not before we've spoken again because she might be chatty with the other one and say something about you selling the flats which would unsettle the tenant you want to keep until 'the end'. If the good one gets spooked she might leave and you don't want that. You should probably tell the arrears tenant that you need the flat back for yourself. Don't mention selling it just yet

I always tell my tenants that I need it desperately for my own homeless daughter. That usually does the trick.

I shall enjoy this project


I have to go out now but I'll pop back tomorrow.

[GlobalC]

Re: Selling rented property

Both myself and my ex business partner had put 30k in each to develop the property into flats back in 2007. My Mum had lent me the £30k which is why none of the money is really mine hence why i don't want to lose it. My ex business partner had a CCJ and couldn't get a mortgage so i at the time had a clean credit file bought them both off of our old business when the bank wanted their money back from the development