Property: How to tempt a tenant out

Someone renting a property agreed to help his landlord sell it and ended up earning himself a commission that would makes most estate agents drool. Robert Liebman investigates
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Indy Lifestyle Online
For homeowners seeking to sell a tenanted property, the best advice in town often appears to be the only advice: first obtain vacant possession. With short-term leases prevailing today, landlords can afford to wait.

Dennis Woodman had a different idea. More accurately, his tenant did. The tenant suggested that, if Mr Woodman were to give him an inducement to vacate, he would gladly go.

A decade ago, such suggestions usually led to extortionate amounts of money changing hands. With property prices skyrocketing, landlords and tenants alike joined the feeding frenzy. Mr Woodman's tenant was on a different wavelength.

The property in question is a four-bedroom double-bay 1930s house in a seaside retirement village in Hampshire. Mr Woodman wanted his house to be occupied while it was on the market: "I didn't like being in London and having a property for sale 100 miles away. You leave yourself open to local estate agents who can wrap you around their fingers."

The "for sale" sign went up in September last year. "I was to give him a fixed sum if the house sold by the new year, and the amount dropped every month if the house wasn't sold, from the start of the agreement. The agreement expired after 12 months." The formula was complex, allowing for improvements made by the tenant. A quick sale would have netted the tenant pounds 20,000. In the event he received nearly the full amount. "It ensured the house would be in good order, looked after, up and running with a fresh feel to it. Instead of being surly, he would welcome buyers. He had the motivation to be a good salesman."

The agreement was formal, in writing, drafted by Mr Woodman, polished by his solicitor, and revised after the tenant's solicitor raised his own points. It covered many issues including VAT, the complex sliding- scale reimbursement arrangement, and reasonable notice to quit.

During the winter the house attracted few viewers. But when Mr Woodman lopped nearly pounds 20,000 off the asking price in early spring a buyer was found. It was one thing for Mr Woodman to have confidence in his unusual arrangement, but with vacant possession in particular, sellers' solicitors are profoundly paranoid.

"We had to reassure the seller's solicitor, which we did with good faith. The buyer had to make a judgement regarding my tenant. The buyer's solicitor would have got a nod and wink from my solicitor that the tenant was getting a cut."

Vacant possession based on such financial agreements are not for everyone and are not watertight, either legally or emotionally.

An unexpected and ultimately inconsequential wrinkle occurred when the house attracted a second offer. If a bidding war had erupted, the tenant's interests (to get a quick sale) and those of the seller (hold out for a higher price) easily could have clashed. "That never happened. This arrangement worked because of good faith," Mr Woodman asserts.

In addition to staying put when the lease specifies that they should move out, obstructive tenants restrict viewing hours, intentionally keep a messy house, and talk down the property, the neighbours and the neighbourhood.

Sitting tenants have strong rights and usually can be shifted only with a healthy payoff, admits Neil Chandler, senior negotiator with East End estate agents Land & Co. "But with shorthold tenants, we encourage landlords to reduce the rent to encourage the tenant to be co-operative and helpful."

Jonathan Crellin of Lane Fox says that the majority of landlord-tenant arrangements he has encountered in nearly 20 years as an estate agent involved straight pay-offs to tenants for vacant possession. But he recalls one particularly adroit and amicable deal: "The tenant lived in what had been his parents' house on a Gloucestershire estate, and he stayed on after they died. We knew that if we tried to force a sale, he would go for a sitting tenancy."

"We calculated that with vacant possession, the property was worth about pounds 90,000, and without it, about pounds 50,000. We also thought that the tenant, who had a young family, wanted to own his own property". They calculated the value of the kind of house that interested him, and in exchange for vacant possession, paid a 15 per cent deposit for him. "If the tenant is young enough, you can usually get them on your side," says Mr Crellin.

Solicitor Leslie Dubow of the Solicitors' Property Group prefers vacant possession, "but something I frequently do is to get the tenant to sign an agreement that they would vacate by a certain date, or by completion."

The tenant still might stay put, but "if they signed such an agreement, you could sue the pants off them, and they wouldn't have any defence," says Dubow. Legal Aid wouldn't come to their rescue either: "you only get legal aid if you had a case. We would argue [to the Legal Aid Board] that they signed an agreement and we relied on it. What possible argument could the tenants make?"

The landlord clearly gains if the tenant signs an agreement to vacate. But "if they refuse to sign, you worry," says Dubow.

Land & Co. can be reached on 0171 729 1815; Solicitors' Property Group on 01707 87 32 17; Lane Fox on 01844 342571.

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