HMO house with AST – two of four tenants are leaving?

You don't indicate when the other two tenant's AST's end, nor if the other two are in a periodic tenancy.

Two choices.

First one, as you suggested, let the first two go. Give notice on the other two, sell and give money away. Hopefully living for another 7 years.

Second one. As the other two have given notice. Get two more in at FULL MARKET RENT. Indicate to the other two, the rent will increase.

As these funds are potentially surplus to your needs. You 'should' be able to give to your kids a regular income that equals the income you are gaining from the return you have from the property. You can also give them i think £3,000k each a year without paying any personal tax on it. They would also have an asset that is increasing in value. You might want to look at meaningful money podcast to assist further.

I had tenants historically that were paying a silly low rent. I changed it. They found somewhere else, I got someone else in. My families lives improved because of this. Keep in mind. This is for YOU and your KIDS. Not people who are polite to you because you keep rents low.

Personally. I'd give it half a year, interest rates will drop, demand will rise and you will get a better price. Don't sell with tenants in situ. You tend to get less money for the houses.

If all 4 are on one AST, then if one tenant gives notice then they all have given notice and must all leave on the 31.3.24. Make this clear to the 2 tenants who haven't given notice so they know they are leaving on 31.3.24. You can also tell them if they find 2 others they can have a new contract (if thats what you want). They are jointly and severally responsible for the rent up to 31.4.24 - and beyond if 2 remain without a new contract. ie the 2 who are leaving are still liable until the property is handed back - whatever that date is. Make that clear to the leavers so that there's some peer pressure for them to get the remainers to leave as well.

Reply to the comment left by Paul at 24/01/2024 - 09:48
Regarding IHT. The £3,000 gift each year is per person so a couple can give 2 lots of £3,000. If there are 3 children then it reduces to £2,000 per child. This money can come from capital - it does not have to come from income. Regarding gifting surplus income then look at IHT403 schedule. Also look at several websites with helpful advice regarding record keeping needed.You need to keep records on your regular income and expenditure so if challenged by HMRC proof can be provided if necessary that normal spending patterns are maintained before and after making the gifts. Ideally this record keeping should have been started before the gifting starts.The gifts need to be regular. IMO I think they need to be a least quarterly so a regular pattern is established.

Reply to the comment left by JB at 24/01/2024 - 10:29All depends on what the clauses state in the original AST ie is the AST for individual rooms and use of communal areas or AST for all the house with rent split and tenants all named or a single lead tenant and others permitted occupiers etc etc.
It would appear here that remaining tenants should anyone leave are liable for the whole rent so any tenant giving notice doesn’t mean all have given notice.

They cant serve individual notices in a joint tenancy. However, if the tenancy is now periodic, they can individually serve notice on behalf of all joint tenants and their notice will end the tenancy for everyone.

If the tenancy is still fixed term, their notice is invalid and of no effect.