Buy to Let Not to Fret

In recent years there has been a significant increase in the take up of buy to let investment.

Buy to let investors have been secure in the knowledge that their property asset will produced excellent capital growth along with the additional potential for income from rent.

Investment landlords are not only from the corporate and professional sector with large property portfolios. Increasing numbers of private individuals have taken the plunge according to research carried out by the Association of Residential Letting Agents.

Four out of 10 investment landlords have just one property, with only 8 per cent of landlords having more than 10 properties. Overall, landlords have an average of 5.5 properties each.

There is always the possibility that house prices may continue to fall in the short term. This, in itself, may not have a significant impact on the buy to let market as various pieces of research have suggested that the majority of landlords plan to hold their properties for the longer term.

However, if the trend is for long term investment, there will be a greater possibility that, during the course of a 10 or 20 year buy to let investment the landlord will encounter problem tenants.

A well drafted tenancy agreement will protect landlords from tenant default both for non-payment of rent and for breach of other tenant obligations, such as the usual prohibitions against sub letting, damaging the landlord's property or causing a nuisance or annoyance to adjoining occupiers.

Should a tenant fail to pay the rent or breach any of the other tenant obligations, the landlord may decide to recover possession from the tenant. In the case of assured shorthold tenancies, the procedure for recovery of possession is a statutory procedure and is governed by the Housing Act 1988.

In short, the procedure requires a default notice followed by a possession hearing in the local county court.

In most cases a landlord will be able to invoke the statutory procedure to recover possession from a defaulting tenant. In arrears of rent cases, the ability of the landlord to recover possession is dependant on the level of arrears which dictate whether the landlord can rely on a mandatory or a discretionary ground for possession.

Where the arrears are less than two months at the time the default notice is given or at the date of the possession hearing, the court has discretion in deciding whether to make a possession order. The court can consider all the factual circumstances in the exercise of its discretion.

Where the tenant states an intention to pay the arrears within a reasonable period, the court will often make a 'suspended' order for possession. The terms of the suspension will be that the tenant pays the rent as it falls due under the tenancy together with a stated amount per month to clear the arrears.

If the terms of the suspension are broken, the landlord can immediately apply to the court to enforce the possession order.

Despite changes made to the law by the Housing Act 1996 to speed up the process, it still takes time to recover possession from a defaulting tenant. The landlord cannot issue proceedings until 14 days after the service of the default notice on the tenant. The possession hearing will take place between four and eight weeks from the date of issue of the court proceedings.

If the tenant fails to vacate by the date stated in the possession order the landlord cannot simply change the locks to the property. Doing so can result in significant compensation being awarded to a tenant and it is also possible for criminal sanctions to be imposed on the landlord.

The appropriate course of action is for the landlord to issue a warrant for possession. The warrant authorises the Court Bailiff to recover possession on behalf of the landlord. In practice it takes a Court Bailiff approximately four weeks from the date of receipt of the warrant to return possession to the landlord.

In view of the length of the procedure for recovery of possession, it is important for landlords to take prompt action when faced with a defaulting tenant.

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