What was the biggest property problem you’d encountered in 2023? I’ve had a
lot of big and small problems, but not all problems will have a direct impact
on profit. The case study that I’m going to share is about taking over a property with a
tenant in it, which has cost me an entire year of rental income. OMG
I took over a property at the start of 2023. This deal came
through to me through a D2V letter campaign. A lady took over the lease for the
entire house, which consists of a wine bar and an 8-bed property on the 1st and
2nd floors. Since there is already a lease on the property and I’m only interested in taking over
the residential part of it, I signed a management agreement with the new
leaseholder, which simply states that I am responsible for the upstairs HMO.
The property is located just 5 mins away from the train station, which is
fantastic. I was very sure that the cash flow was going to be amazing as well.
While the solicitor was preparing the agreements, I knew that the previous
leaseholder had also served notice to ask all the tenants to leave. So
everything went according to plan until something very wrong slowly surfaced.
By the time I took over the HMO, I immediately notified the
builder to start the refurb. He told me that someone was still in there. I
spoke to the leaseholder of the property, and she said, “Well,
I didn’t
want the property to be entirely empty, so I let him stay. But he promised he’d leave by
the end of the refurb or whenever you want him to.” The builder also said that
he seems to be a nice guy, so he said having him there during the refurb was
not a problem.
I used a letting agency to help me find tenants, and they
reassured me that the property’s location is superb and we will be able to fill
the rooms in no time. I’ve instructed the letting agency to ask the tenant to
leave. The tenant has expressed his interest in staying. Well, that sounded
like we already had one tenant, voila!
Two months went by, and the refurb had now been completed. The
letting agents were there to arrange for the white goods and soft furnishings.
However, I hadn’t
received any rental payments from the tenant until this point. When the letting
agent kindly asked him to leave again, he started acting awkward and
intimidating to the agents when they were conducting viewings. From that moment
on, I knew I had opened a Pandora box that I once thought was a chest of
treasure…
I guess the agents were scared of that tenant, or they simply
didn’t
know what to do with this property. They started not replying to me in a timely
manner. The staff at the agency were either on holiday or got sick after the
holiday. So things moved very slowly forward and we weren’t making any progress. I was not
happy about it but I ran out of ideas about how I could put this right. In the
end, I made the decision and called another letting agency to take over this
property, and in particular the tenant eviction part. The former letting agency
(which was basically comprised of a team of females) happily handed over the
keys on the same day (which was weird in most cases). The current letting
agency (a solely male team) has proved to be more experienced with annoying
tenants. They took the matter into their own hands and simply confronted the
tenant and asked him to leave.
We offered the tenant money to leave, but still he wasn’t able to
find a place (or didn’t look for a place at all), so he stayed. So the only
way to fully repossess the property was to serve notice and wait for the
bailiffs to evict him. We are now waiting for the court to give us an eviction
date. Luckily, this can be done in my absence, and the letting agent takes over
the application and all the communication with the council.
Two of the biggest takeaways from this lesson are:
1. Make sure that whenever you take over a tenanted property, there are legitimate tenancy agreements in place;
2. A family-run letting agency proves to be more efficient
and take matters in their own hands compared to a chained letting agency.