What happens at the end of the term?
This is often the trickiest part of the whole process.
Handling the process of regaining possession if the rent-to-renter does not leave voluntarily.
Managing dilapidations and determining responsibility for repairs at the end of the term.
Dealing with the transition of responsibilities for managing the tenancy and collecting rent, especially if the residential tenants are still in place.
This is often the trickiest part of the whole process. That’s primarily because the rent to rent lease term may come to an end before the residential occupier has left.
Secondly, when the rent to rent lease term ends the rent to renter may not leave voluntarily, in which case the landlord owner would need to serve a “notice to quit” and if necessary apply to the court to regain possession by way of a lease forfeiture.
Thirdly, and this is perhaps the thorniest issue of all, how do you deal with dilapidations? If the occupier tenant has left, then this should be straightforward. You do an inspection, ideally with an independent third party such as the surveyor who did the original schedule of condition, then you draw up a schedule of dilapidations.
You then agree with the rent to renter how this has to be handled. Does the rent to renter do the reinstatement, or does the landlord owner do it and charge the rent to renter?
To retain the tenant/s, take over all the responsibilities for managing the tenancy and collect the rent direct, or otherwise delegate this to a letting agent
The tenant/s may be willing to surrender the tenancy given the rent to rent situation
To seek possession using the no-fault Section 21 process*, presuming the tenant’s contractual term has ended and the tenancy is now periodic
To seek possession using Section 8 of the Housing Act 1988 as amended, using the appropriate ground/s for possession where there is a breach of contract
Obviously, if the tenant occupier is still in place then that complicates things no end. Should you do an inspection at the end of the rent to rent term with the occupier tenant’s agreement, and then agree to financial compensation? Or do you wait until the occupier leaves? All these questions and scenarios need to be taken care of in the rent to rent agreement.
Once possession has been obtained by the landlord owner, the owner will take over as the direct landlord of the residential occupier/s, if they are still in place.
Because residential tenants have legal protection, regardless of who their landlord is, the landlord owner then has a decision to make:
Where the landlord owner takes over as the direct landlord of the occupier tenant/s, complications can arise where the rent receipts, legal documentation and deposit details are held by the rent to renter. The rent to renter may cooperate, or not, depending on the relationship.
*Abolition of Section 21 – the Government has promised to abolish the no-fault Section 21 eviction process which if enacted will pose a real problem for rent to rent arrangements. The proposed replacement by an indeterminate tenancy means that there is no guarantee that the rent to renter will be in a position to return the property to the landlord owner with vacant possession.
One possible solution is to have the tenant/s on licence agreements. This is easier said than done. A licence will avoid creating a tenancy, which means the tenant can be removed at the end of the contract term by means of a simple notice to quit, similar to a lodger.
But, and this is a big but, to establish a genuine licence situation certain strict conditions must be met: (1) the landlord must have complete access to manage at all times and the licensee occupier must not have exclusive possession of any part of the property. (2) the management must be active and comprehensive with services provided. Relying on a rent to renter to avoid creating a residential tenancy, and to do all that’s required to achieve that, could be asking too much in many cases.
