AST Clauses, Holding Deposits and Affordability Checks

AST Clauses, Holding Deposits and Affordability Checks

16:57 PM, 5th March 2014, About 11 years ago 61

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Hi All,

I’ve been getting the paperwork ready for a BTL property that I’m close to completing on. There’s three things that I’m not 100% sure about and was hoping for some advice on. They’re all unrelated, so apologies if I should be raising these under separate discussions…

(1) Adding clauses to an AST
I’m aware that you have to be VERY careful with ASTs. I’m using a NLA template but am wanting to add the following two items under the tenants obligations:

“Not to light any fires in the Property. Fireplaces in the Property have been retained as decorative features and are no longer suitable for open fires or fuel burning appliances.” AST Clauses Holding Deposits and Affordability Checks

and

“To have the use of all appliances in the property, as laid out in the Inventory save those which are noted as not working. However, should any items require repair, or be beyond repair, the Landlord does not undertake to pay for any costs to repair or to replace the appliance, except those which the Landlord is required by law to maintain.

Do these clauses sound reasonable? The first one is entirely my own concoction, so if anyone has any better ideas or thinks it is unnecessary, please tell me. I was just wanting to cover myself in case the tenant causes damage and claims never to have been aware that he couldn’t use the fireplaces. I was going to add something similar to the general notes in the inventory, and of course tell them in person.

The second one I wanted to add in case I end up with ‘heavy handed’ tenants. I’m happy to fix or replace one or two white goods a year, but don’t particularly want to be liable for replacing the entire lot!

(2) How much to charge for a holding deposit
I know there’s been some good discussion about holding deposits on this site already, but I don’t remember anyone saying how much they should be. I’ve read somewhere that ‘about a weeks rent’ should be asked for as a holding deposit, which seems reasonable. However, I’ve also read that up to ‘half a months rent’ can be asked for, which, although it would deter tenants pulling out at the last minute (which might end up costing the landlord several weeks rent), does seem rather steep. If asked for at all, what are other landlords asking for as a holding deposit?

(3) Affordability checks
Do people think that the standard referencing check of income being at least 2.5 x rent is enough? If the tenant is losing say 20% of their income to tax, that means half of their net income would go on rent. After council tax and utilities, not to mention any debts or other financial commitments they might have, many are going to be broke. It’s no wonder rent arrears are such a problem. Mortgage lenders require incomes to be 4 to 5 x mortgage, so a rental affordability check of 2.5 x rent seems rather low. Does anyone impose their own, more stringent criteria, such as 3 x rent? Or would this be too restrictive…?

Any advice or comments to any of these queries/topics would be most welcome and appreciated.

Simon


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Industry Observer

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20:53 PM, 10th March 2014, About 11 years ago

Reply to the comment left by "Romain " at "10/03/2014 - 18:51":

I don't agree Romain.

Commercial leases alwaysoperate strictly on a full repairing and insuring basis, obligations on the tenant.

Domestic residential leases (agreements) operate 100% the other way round and always have done. Unless an agreement specifically puts a responsibility on a tenant in the absence of such clarity I'd argue Landlord liability every time. The Landlord has provided the appliances as part of the tenancuy on an ongoing basis. If there is no limit or evasion of repairing or replacement obligations on a Landlord I'd say they'd start with him every time and twice on Sundays.

The 1985 SAct deals very much fairly and squarely with structure and fabric and leaves appiances for making use of the Landlord's supply to the parties to sort out contractually. If the LL hasn't put that onto the tenant in the contract I'd say 100% every time if need not caused through tenant mistreatment or misuse of the item (note Mary even shows tenants how to boil a kettle!!) then Landlord is obliged to continue that supply.

Doesn't have to be a new fridge etc - just a safe one with reasonable life left in it.

Romain Garcin

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21:53 PM, 10th March 2014, About 11 years ago

Reply to the comment left by "Industry Observer " at "10/03/2014 - 20:53":

IO, what do you not agree with?

That there is no implied obligation to repair in a lease is a fact.
Whatever the situation is in a commercial lease, it is because it is explicitly stated in the lease.
The same apply to residential leases, as far as I understand, unless the law says otherwise. It partly does so through s.11. You do not seem to say otherwise when you say that it is up to "the parties to sort out contractually", ie. indeed there is no implied obligation to repair, so if not explicit in the lease then the landlord has no obligation (and the tenant hasn't either).

Joe Bloggs

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23:11 PM, 10th March 2014, About 11 years ago

Reply to the comment left by "Simon Coppen" at "10/03/2014 - 14:14":

anyone can see provision of batteries are completely different to repair of appliances...batteries are consumables.

Industry Observer

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8:44 AM, 11th March 2014, About 11 years ago

Romain

leases and agreements are the same thing but in practical, operational terms it is necessary to separate tham for two reasons.

First commercial lets are almost invariably leases, called leases and as you say start with specific insuring and repairing obligations - though in both cases dtructural rather than contents.

Second in residential lettings we are used to calling leases agreements and they operate differently. The implied obligation to repair or replace in my view (and I would suggest most Judges if and when tested) rests with the landlord because they have supplied the item in the first place and confirmed its provision in the inventory and that in effect they want it back at the end of the agreement.

In my view that would be the default position because the Landlord is providing the items as part of the agreement and for which, overall, rent is being paid.

I don't think the position is the same in residential, s11 is a red herring really because it deals with structure and supply of utilities.

I think the truth lies more in the HMO Management Regs which clearly place the responsibility to maintain on the Landlord. In my view it is only a short step fro there to any other residential situation, not a giant leap. Especially now with Selective Licensing.

My view is that to avoid any such liability the Landlord needs to state it in the inventory, though I still think it is not good practice.

Romain Garcin

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14:33 PM, 11th March 2014, About 11 years ago

Reply to the comment left by "Industry Observer " at "11/03/2014 - 08:44":

I think I understood what your view was, however, please note that I was interested the legal position 😉
It seems I won't be getting such references.

Note that s.11 is relevant because it explicitly mentions all the appliances that the landlord might be providing as excluded from the repairing obligations.
To quote: "... but not other fixtures, fittings and appliances for making use of the supply of water, gas or electricity".

Industry Observer

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14:40 PM, 11th March 2014, About 11 years ago

We are looking at the same thing from two different angles.

I'm saying s11 is not relevant to this situation of a clause within a tenancy agreement - I know very well exactly what s11 provides for and what it does not.

It is the inventory that takes over where s11 leaves off, which is excluding white goods.

But the inventory, unless repair etc is excluded, is where they are mentioned in a document that is attached to the agreement. Hence if the LL has provided them and does not exclude repairing them I'd say he is liable. By implication if not specific wording - after all he only has to say he isn't to avoid any such liability.

I doubt you'll ever get a case in a high enough court to satisfy your legal authority craving Romain and as we both know unless it is a gold plated cooker encrusted with jewels the costs of finding out legally will never be worth the argument.

Romain Garcin

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15:41 PM, 11th March 2014, About 11 years ago

Reply to the comment left by "Industry Observer " at "11/03/2014 - 14:40":

"It is the inventory that takes over where s11 leaves off, which is excluding white goods"

Clearly the inventory cannot imply an obligation to repair... Since there is no implied obligation to repair in any case.

I think I'll leave it there as, no offence, you haven't got references to provide.

Industry Observer

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16:29 PM, 11th March 2014, About 11 years ago

Give me your references or authorities that ymake you convinced if an item is supplied by a Landlord, and he does not disclaim liability for their continued working condition, that he can avoid that implication

Michael Barnes

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12:00 PM, 1st May 2014, About 11 years ago

Reply to the comment left by "Industry Observer " at "10/03/2014 - 12:30":

I let unfurnished.

Sometimes tenants leave, or sell to me cheaply, appliances that are in good repair.

These appliances I provide to subsequent tenants on the basis of "no repair or replacement if break down. If tenant chooses to repair at his/her cost then they may take the appliance away at the end of the tenancy".

Industry Observer

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12:13 PM, 1st May 2014, About 11 years ago

MdeB

Let's hope no-one gets electrocuted by the non PAT tested second or third hand applicances then.

You may disclaim repair etc libilities - what you cannot do is disclaim H&SE ones under Supply of Goods Act and various others.

Good luck to you - in my view anyone letting with appliances with unknown provenance I was going to say needs their head examining.

Let's be more polite and say you are taking an unnecessary risk. Electrocution or fire?

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