Should I formally allow rent arrears to be paid out of deposits?

Should I formally allow rent arrears to be paid out of deposits?

0:03 AM, 23rd October 2024, About 3 days ago 3

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Hi Everyone, What’s the best way to converge on market rents?

I have good tenants of several years standing, in a London HMO.

Being good tenants, I’ve never really raised the rent to market levels. I now see that their rents have fallen 20% behind market rates. I warned them a year ago that their rent would need to converge to market levels in 1-2 years.

I’d like to allow them to run up arrears and pay it off with their deposit. Is this wise, legally speaking?

I’m happy to take the risk in terms of damages etc.

My question is more about whether formally allowing arrears to be taken off the deposit might create problems elsewhere?

Many thanks

JD


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Paul

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11:00 AM, 23rd October 2024, About 3 days ago

If it's your only BTL I would ensure the rent is closer to what it should be. If you have multiple I would be less worried, one bad egg out of a dozen is fine.

If it's one, well, I was in the same position as you. Great tenants been in for a while, paying way below market rates. Talk to them, show them some figures about your mortgage that's just gone up ( hasn't it ), show that you really are not making much now.

That worked for me. If not. Look, you being nice at YOUR EXPENSE. They will spend that 20% difference on living the life they want, so you are paying for this.

Tell them where you want the rent and if not you will need to ask them to leave. I would not start dropping it on the deposit, that's for other things, like trashing the house when they get the hump you are moving them on.

NewYorkie

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11:27 AM, 23rd October 2024, About 3 days ago

I now have one remaining BTL, and because the tenant had a young child, I didn't want to cause her any difficulties. But allowing the rent to drop so far behind the market rate was such a poor decision for me and her, and has been costing me money for the past 2 years.

I laid out my situation for my tenant, showed the current market rent for surrounding flats, and explained her rent must increase significantly if I am to avoid selling and evicting her.

I've increased by 10% for the past 2 years, and just served notice of another 10% increase from January. She hasn't said a word, which suggests she can afford it, and suggests she could have afforded it if I had made regular increases over the past 6 years. Lesson learnt!

I would not allow her to run up arrears in the expectation they could be paid from the deposit. It is highly unlikely the deposit would cover more than a few months of such arrears. If you want to avoid potential legal complexities, avoid informal, emotionally motivated arrangements with tenants.

DPT

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10:42 AM, 24th October 2024, About 2 days ago

"Being good tenants, I’ve never really raised the rent to market levels".

This sentence makes no sense at all. Market rent has nothing to do with the tenants behaviour, or for that matter what they can afford or even your costs.

You have created this situation with this approach and I hope you will now consider smaller increases to reach market rents over time, rather than something unaffordable for the tenant.

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