renew

 

Tenancy renewals, why?

  1. To maximise your income by increasing the rent.
  2. To maximise your income by attempting to end the tenancy at favourable times of the year, e.g. in summer when property tends to let more quickly and for higher rent.
  3. To maximise your income by attempting to avoid ending the tenancy at less favourable times of year e.g. in winter when property tends to take longer to let and for lower rent.    

What are the financial benefits and why should I pay?

The tenancy renewal process takes longer than you may think (see example process below) and due to the time involved, cannot unfortunately be covered within the normal monthly management fee.  There are substantial financial benefits to renewing a tenancy that far outweigh the administration fee – below illustrates how you could earn an extra £1550 in rental income by renewing the tenancy.

Fixed Term Renewal

Initial 12 month fixed term tenancy                                                          12x £650 = £7800

Fixed term tenancy renewal for further 12 months at increased rent           12x £675 = £8100

Re-let in summer for further 12 months at increased rent                          12x £700 = £8400 

Total Rental Income                                                                                             £24,300

Initial Tenancy Allowed to Run Periodic

Initial 12 month fixed term tenancy                                                        12x £650 = £7800

Tenancy ‘rolls on’ a periodic basis for 6 months with no increase               6x £650 = £3900

Relet for same rent in winter (one month to relet) for remaining period      17x £650 = £11050

Total Rental Income                                                                                            £22,750

 

Difference in rental income - a whopping £1550!

 

But I am concerned my tenants will leave if the rent is increased.

All rent increase recommendations are carefully considered by your dedicated Property Manager who will know your property inside out and how the current rent compares with market conditions, so any increase will usually be in-line with market conditions. Also bear in mind that moving is expensive, so any rent increase may be inconsequential to your tenant by comparison.

Other things to consider:

Small vs large increase - as the length of average tenancies increases, it can often be very financially advantageous to make small increases over time rather than get left behind by the market and then attempt to make a large increase to catch up, which may result in your tenant leaving.

Property condition – it’s often better to make property improvements over time with tenants in situ, than have more to do when the tenant leaves, risking the possibility of lost rental income whilst the property is upgraded between tenancies. Improvements can also be brought to the table at the renewal negotiation e.g. the tenant agrees to pay extra on the basis that an improvement is made, essentially paying towards the improvement – it’s a win-win.  

   

What happens if my tenants won’t renew for a Fixed Term?

Sometimes despite our efforts, tenants will not renew a tenancy on a fixed term tenancy and the tenancy may continue on a periodic basis. This can happen automatically as a Statutory Periodic Tenancy or more formally, as a Contractual Periodic Tenancy. As part of our renewal system, we use the formal option of a Contractual Periodic Tenancy as this has some benefits to landlords:

1. The council tax remains the liability of the tenant (in some circumstances the liability could become the landlords under a Statutory Periodic Tenancy).    

2. Any special terms agreed in the original tenancy continue because the Contractual Periodic Tenancy is a continuation of the original tenancy rather than a new Statutory Periodic Tenancy. 

3. Provides a stronger position for tying in any guarantors.      

The same amount of work and effort goes into agreeing and signing a Fixed Term Tenancy renewal as a Contractual Periodic Tenancy, so we charge the same administration fee for both types. If we didn’t, we’d only have to charge more for the Fixed Term Tenancy. The renewal system has been designed to be fair and ultimately give you the best outcome possible. If however, you would prefer us not to try to negotiate a renewal of the tenancy, that’s fine, just let us know.    

 

Example Renewal Process

-       Tenancy starts

-       Your dedicated Property Manager will review the current market conditions taking into consideration the location, condition, time of year and current rent three months prior to the end of the tenancy.

-       Renewal letter sent to landlord with personalised recommendation.

-       Renewal letter sent to tenant with offer to renew.

-       Open negotiations (rent, break clause, improvement requests that may influence the renewal process etc).

-       Upon agreement of terms, the renewal agreement is drawn up and sent for signature.

-       Documents chased if needed, returned, dated and exchanged.

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