ASK537: Is this ground rent clause a deal-killer? PLUS: Can my tenant stay after giving their notice?

0:02Hi, I'm Rob. And I'm Rob. And this is Ask Rob and Rob.

0:06Rob D:Yes, it is Ask Rob and Rob. And we are here once again because it's Tuesday. And that means we've got two property questions to answer on behalf of our listeners. And we do do this every week. So if you've got a question of your own and you'd like to send it in, Rob, it's so easy. Super easy. Just go to one place, propertyhub.net forward slash ask there. You can find the phone number if you want to call in and leave an answer phone message. You can leave a message directly there on the web page, or you can put a written question into us for our Sunday Times column. We do not mind, but for this show, audio is kind of important.

0:38And luckily, we've got two great questions in this week. All right, let's listen to our question in from Charlie. Hi, Rob and Rob. It's Charlie here.

0:47Rob D:Thanks very much for all the content you've produced over the years. I'm a big fan. I've been listening right from the outset, and I've even bought a few properties off you. My question is about doubling ground rent clauses. So ground rents can either increase in line with the retail price index or be doubling ground rents. If they're doubling ground rents, they can be problematic for some lenders. And apparently some lenders won't even consider lending money where there's a doubling ground rent clause. But, and this is the detail I wanted to ask you, my doubling ground rent clauses double every 25 years.

1:18Rob D:And that's nowhere near as bad as a doubling ground rent clause, which doubles more frequently than that. In fact, it might be that a doubling ground rent clause will put the ground rent up less than an RPI clause over a 25-year period. But what do you think about this? And particularly, what do mortgage lenders think about 25-year doubling ground rent clauses? Because I'm getting mixed information from them. Anyway, thanks very much for all your content and I hope to speak to you soon. Hi, Charlie. This is an interesting one because currently this is not a type of deal that I would entertain because leverage is absolutely everything to property investment and currently as things stand today you'd have difficulty with leveraging.

1:58There may be more options at 25 years but certainly at 10 at 15 you're really really restricted and even at 25 I'd be taking a lot of advice. Now if this was never going to be addressed I wouldn't invest at all because it's not just the lending which I've already said is absolutely key to property investing but it's also your exit who's going to buy it from you. But there may be good news on the horizon. It is planned at the moment that the leasehold reform bill will cap these ground rents at£250 per year. Now when that happens you would expect lending to be fine on those properties and the issues that people have around these properties could go away.

2:40You could try and take advantage of this because currently the values of those properties will be impacted because of those leases even with this coming through and you may be able to get a slightly better deal because of it because lending restrictions are in place today and won't be sorted until this comes through. Now it sounds like it will go through currently the target is late 2028 but things can change we've seen that before so until it's through I wouldn't say it's a done deal me personally I wouldn't take the gamble it's just not worth it for me and the type of investor I am but if you are trying to spot a value play maybe this is something if you're bold you could go for again it comes down to your tolerance to risk and most importantly the deal that you do it would have to be a very juicy deal for me to be even remotely interested but if you found that opportunity then maybe it's something for you to consider whether it's 10 15 or 25 least doubling periods.

3:44Rob D:Okay, let's have our next question now from an OG listener. Hi, Rob and Rob, Ryan here. I've been an avid listener since the days of the Rick intro, so huge thanks for all the content you've put out. My question surrounds tenants giving notice. What do you do when a tenant gives, say, two months notice, but then near the end says their onward move has fallen through and they need a little longer? I've had this happen recently. I'd already lined up a replacement and tenant and timed everything neatly. But because the existing tenant needed extra time, the incoming tenant eventually moved on elsewhere.

4:17So I ended up back at square one, remarketing the property, which is particularly frustrating when you're trying to achieve top market rent. I've actually got another version of this currently ongoing now. The tenant has given two months notice, but they haven't yet even secured the property they'll be moving into or even found it. So the risk of the move over running feels even higher. Obviously, lesson learned is to perhaps keep marketing and have backup applicants lined up but I'd be interested to know how you both handle this in practice. This is also a situation where you're on genuinely good terms with a tenant so you're not looking to turf them out onto the street but equally the delay can create real financial and logistical problems.

4:57From a legal standpoint as well where do landlords actually stand here because it seems to me that once the notice period expires the tenant can effectively remain and then leave whenever they eventually secure somewhere else with very little consequence whilst the landlord carries all the uncertainty and risk. Part two to this question is around joint tenancies. Where do landlords stand if one tenant in say a family of three gives notice to move out but the tenant was a key contributor toward the rent? The financial position of the remaining tenants may not have been something you'd originally have accepted.

5:31In that scenario, does the outgoing tenant remain jointly and severally liable for the rent, or are they effectively off the hook whilst the landlord is left carrying the significantly increased risk with the remaining occupiers? My understanding was that with pre-renters right act tenancies, one tenant could potentially unilaterally end the tenancy for everyone. But I really value clarification on how that works in practice and how landlords should best protect themselves. So overall, what's the best way to handle these situations, both practically and legally, please?

6:07Rob D:Cheers. Ryan, thank you for your question. And thank you for being a listener for so long. Brick Vintage is the best vintage, in my opinion. So how can we repay you? Can we do anything to help you with this situation? Well, not so much, unfortunately, because you are essentially right. You're in a situation where you are legally in the right, but practically there's not an enormous amount you can do. So if a tenant formally gives notice then they can't just unilaterally rescind it. You need to agree for that okay yeah actually we'll rescind your notice and the tenancy will continue. So if you don't do that then it'll come to the end of the notice period and the tenancy will end.

6:42Rob D:But if they just stay on because they've got nowhere else to go then there is practically speaking nothing you can do to get them to physically leave immediately. You said you don't want to turf them out on the street well as I'm sure you know, you can't just turf them out on the street. You'll have to go through the legal process. So if they want an extra two, four, six weeks to get that onward move sorted, then it's not a lot of help to you having a legal process that could take nine months to play out. So it's a really tricky situation and it does happen. What can you practically do? Well, you've hinted at the first part yourself, which is have a good relationship with your tenants and try and get information from them at the point of them giving notice.

7:18Rob D:And then as things go along, so find out, are they giving notice because they have found their next place or have they not found it yet if they haven't found it yet then that could mean it's something you want to keep a closer eye on you can also arrange a pre-checkout inspection so the stated reason for it is to go around and see if everything's in order is there anything that they'll need to sort out in order to get their deposit back in full but it's also another opportunity to check in and see if you can get a sense of what their plans are are things reassuringly in boxes or do they seem very relaxed and well established still.

7:48Rob D:None of this is guaranteed to service any information for you, but it's something that you could potentially look at. Then if you end up in a situation where they do say, actually, we're not going to leave when we said after all, we're going to stay on for a bit. Then while you can't just chuck them out and you would have to go through the courts, I would recommend communicating very clearly with them. So I would make very clear that the tenancy has ended and they are overstaying. You are not agreeing for the tenancy to continue and not a black and white rule, but depending on the situation, by being inclined to start visibly taking the steps towards taking legal action, making an application to the courts and making them aware of the costs that you may try to recover from them.

8:24Rob D:Not necessarily because you're going to end up doing it, but it'll make them maybe get a little bit more serious about securing their next move. So Ryan, it is a really tricky situation. There's no silver bullet, but I hope there's something helpful in there for you. So that's just done for another week. Thank you for listening. We'll be back with the main event, The Property Podcast on Thursday. Until then, take care, have fun. Bye-bye. Bye-bye. Thank you.