Selling rented property

[PlanB]

Re: Selling rented property

Oooh you've got decent equity in these properties. Excellent.

I expect you mean the leases are 997 years (you granted a 999 year lease at the outset?) and the Freeholder is your business parner. Freeholds have no defined length. When you own a Freehold you own it forever, until you sell it obviously, it never expires.

The flats should be worth more if the Freeholder (your business partner) were to 'sell' a share of the freehold to the lessees (you). It can be sold for as little as a £1. Is the Freehold a limited company or in your business partner's sole name?

A buyer with a share of freehold included in the sale will be happy because that means they have control of all the expenditure. They know they won't get hit with £30k for a new roof which they would have to pay under the service charges. Likewise they'll be happy to get the roof fixed when it needs it so they don't have to wait for the freeholder to get his arse into gear with maintenance.

Does your business partner particularly want to hold onto the Freehold? Do either/both these flats pay significant Ground Rent to the Freeholder?

[PlanB]

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

I remember the story now. I'll check back over your other threads where this was first raised. It may make sense to merge them so everything is in one place. Leave it with me

[GlobalC]

Re: Selling rented property

Oooh you've got decent equity in these properties. Excellent.

I expect you mean the leases are 997 years (you granted a 999 year lease at the outset?) and the Freeholder is your business parner. Freeholds have no defined length. When you own a Freehold you own it forever, until you sell it obviously, it never expires.

The flats should be worth more if the Freeholder (your business partner) were to 'sell' a share of the freehold to the lessees (you). It can be sold for as little as a £1. Is the Freehold a limited company or in your business partner's sole name?

A buyer with a share of freehold included in the sale will be happy because that means they have control of all the expenditure. They know they won't get hit with £30k for a new roof which they would have to pay under the service charges. Likewise they'll be happy to get the roof fixed when it needs it so they don't have to wait for the freeholder to get his arse into gear with maintenance.

Does your business partner particularly want to hold onto the Freehold? Do either/both these flats pay significant Ground Rent to the Freeholder?

There are no maintenance fees or ground rent. If I remember correctly the solicitor when splitting them up into separate dwellings made it so the two flats would be both be liable to any communal areas or building, I can't remember exactly how he did this but It was done for the purpose of when the flats were sold on as individual dwellings......hope that makes sense! But legally wise I know that this issue has been sorted.

Yes I couldnt get BTL for anything more than 75% LTV so we had to work it that the value matched the money we had initially put into the project. Which was slightly over valued but the mortgage company seemed happy.

[PlanB]

Re: Selling rented property

There are no maintenance fees or ground rent. If I remember correctly the solicitor when splitting them up into separate dwellings made it so the two flats would be both be liable to any communal areas or building, I can't remember exactly how he did this but It was done for the purpose of when the flats were sold on as individual dwellings......hope that makes sense! But legally wise I know that this issue has been sorted.

I probably didn't explain that very well. What I meant was the flats will have a greater value (worth more money) if they are offered with 'share of freehold'. When you get to the marketing stage you could say "share of freehold available" or something like that.

I'm sure your solicitor got the paperwork right. The solicitor for your buyer will want to make up his own mind on that. The Ground Rent will be referred to in the lease somewhere but it may be stated as "peppercorn" which means zero.

Likewise the legal liability for the maintenance and repair of the building will be spelt out in a "covenant" in the lease even if you (as lessee) and your business partner (as Freeholder) have adopted an informal approach to this. There will be a list of things which the Freeholder can and can't charge back to the lessee(s) even if the Freeholder doesn't do that now because you're mates. These will be things like the common parts' electricity (is there a light in the hallway?), buildings insurance (who pays that at the moment?), and so on.

How the service charges will be collected will also be spelt out in the lease. It will say payable annually on such-and-such a date and probably say that a pre-estimate will be provided to the lessees on such-and-such a date.

A buyer will ask to see the last three years' service charge accounts. If you've muddled along without any formal record this may spook the buyer's solicitor. These are the little legal things which can cause a sale to collapse at the eleventh hour so it's good to get that sorted now.

[GlobalC]

Re: Selling rented property

I probably didn't explain that very well. What I meant was the flats will have a greater value (worth more money) if they are offered with 'share of freehold'. When you get to the marketing stage you could say "share of freehold available" or something like that.

I'm sure your solicitor got the paperwork right. The solicitor for your buyer will want to make up his own mind on that. The Ground Rent will be referred to in the lease somewhere but it may be stated as "peppercorn" which means zero.

Likewise the legal liability for the maintenance and repair of the building will be spelt out in a "covenant" in the lease even if you (as lessee) and your business partner (as Freeholder) have adopted an informal approach to this. There will be a list of things which the Freeholder can and can't charge back to the lessee(s) even if the Freeholder doesn't do that now because you're mates. These will be things like the common parts' electricity (is there a light in the hallway?), buildings insurance (who pays that at the moment?), and so on.

How the service charges will be collected will also be spelt out in the lease. It will say payable annually on such-and-such a date and probably say that a pre-estimate will be provided to the lessees on such-and-such a date.

A buyer will ask to see the last three years' service charge accounts. If you've muddled along without any formal record this may spook the buyer's solicitor. These are the little legal things which can cause a sale to collapse at the eleventh hour so it's good to get that sorted now.

There are no service charges as its only the 2 flats in the building. The only grey area I think would be the communal hallway lighting which is currently being billed to Flat B as it is that flat that needs the lighting for the stairwell.

Yes I'm sure The freehold could be offered along with the sale. I did speak with my ex business partner yesterday who said that his family might possibly buy the flats from me depending on the valuations which would make things a lot easier. So i think the first port of call is to get some valuations done and get the Flat B tenant out!

[PlanB]

Re: Selling rented property

The only grey area I think would be the communal hallway lighting which is currently being billed to Flat B as it is that flat that needs thelighting for the stairwell.

You'll need to set up a separate electricity supply meter for that.The account should be in the name of "Landlord Supply". Anyone buying Flat B won't want to pay for the cost of lighting which also benefits Flat A who won't be paying a penny towards the cost.

Even if Flat A has a separate entrance (is that why you wired it this way?) no lessee can be made to pay for anything which doesn't relate to the demised area of their lease plan. The repair and maintenance costs of everything else has to be split between the lessees such as roof repairs, buildings insurance, communal TV aerial, drainpipe and gutter issues etc.

Does this mean your current tenant in Flat B has been paying for this hallway supply on their own electricity account, and do they know it? You may need to sort that as all part of your exit strategy for them. For example you could say there has been a genuine error causing her to be charged for electricity which she doesn't owe for the last three years so you'll write off her rent arrears to compensate if she moves out asap.

[GlobalC]

Re: Selling rented property

Hi Plan B, I now want to get the tenant out in flat B. I want to serve a section 21 notice but realise i can't while the deposit is not in a deposit scheme. So what do i do? do i need to put the money in a scheme asap or is this not feasible now?

[PlanB]

Re: Selling rented property

I want to serve a section 21 notice but realise i can't while the deposit is not in a deposit scheme. So what do i do? do i need to put the money in a scheme asap or is this not feasible now?

Yes it is perfectly possible to register the deposit retrospectively. You don't even have to part with the Tenant's actual deposit money because you can use the only Government-backed non-custodial scheme where you hold the deposit and the scheme insures it for the Tenant.

Go to this website and do it online. You register with the business and then instantly insure the deposit in the scheme for a fee of around £29. They will send you all the necessary lawfully compliant paperwork by instant PDF which you can then email direct to your Tenant. If you need any help then give me a shout.

http://www.mydeposits.co.uk/landlords

[GlobalC]

Re: Selling rented property

Afternoon Plan B I have dug out the old tenancy agreements they were last signed for 28/12/10 however on both the agreements there is no deposit amount listed and the box is ticked saying no deposit taken! The agreements have been signed by both tenants.

I did actually take a deposit and from my memory I think I remember making the tenants aware that the deposits were not going to be put into the government scheme hence why the agreement has no record of it. So my question is, As there is no record on paper of the deposit can i go ahead and issue a the section 21 notice? and is there going to be any implications?

[PlanB]

Re: Selling rented property

I have dug out the old tenancy agreements they were last signed for 28/12/10 however on both the agreements there is no deposit amount listed and the box is ticked saying no deposit taken! The agreements have been signed by both tenants.

I did actually take a deposit and from my memory I think I remember making the tenants aware that the deposits were not going to be put into the government scheme hence why the agreement has no record of it. So my question is, As there is no record on paper of the deposit can i go ahead and issue a the section 21 notice? and is there going to be any implications?

That's a tricky one. Common sense says you took a deposit so you are obliged to place it in a Government approved scheme by law even if it wasn't referred to in the tenancy agreement. I'd be inclined to insure it to avoid a DJ (or any sharp housing lawyer the tenant gets) taking the same view.

The fact that you took the deposit and told your tenant you weren't going to place it in a scheme and they didn't mind your cavalier approach, doesn't release you from your legal duty to comply with the Act. So what if the tenant didn't mind/care/know about it, the bottom line is you still had to place their deposit in a Government approved Scheme to comply with legislation.

How did you get paid the deposit? Was it paid in cash with no receipt? There may be evidence of that payment even if your tenant paid cash if they had made a cash withdrawal from their bank on the exact same day you received it which shows on their statement. Once you're in court you can't lie (that's contempt). So if the tenant raises the issue of the deposit in front of the DJ then you'll have to admit it. There may be no evidence on paper of any deposit but you can't lie under oath if you're asked about it.

The other point is you'll be claiming rent arrears. You've said earlier that you've used the tenant's deposit towards the rent owed. You can't deny you had their deposit while at the same time tell the court you've used it against arrears. Even if you don't tell the DJ that, the tenant probably will.

I think you'd be wise to insure it with mydeposits.

Sorry if this post sounds a bit bossy (not like me at all) but I'm only wanting to protect you from getting into trouble in court

[GlobalC]

Re: Selling rented property

Ok great, I see what your saying and it makes perfect sense. Hopefully this won't end up in Court and she goes when I ask nicely

[GlobalC]

Re: Selling rented property

just using mydeposits now and it says they cant insure the deposits if it is so i can issue a section 21, should i just lie about this

[PlanB]

Re: Selling rented property

just using mydeposits now and it says they cant insure the deposits if it is so i can issue a section 21, should i just lie about this

Is that a Yes/No tick box question or a statement? I've never been asked why I'm insuring a deposit.

I would never tell anyone to lie about anything, but the truth is you're insuring them because you've been advised that you should. You've not served any section 21 Notices yet have you

[GlobalC]

Re: Selling rented property

sorted it

[GlobalC]

Re: Selling rented property

this is not going to be easy, they also need an alternative address for the tenant