Renewal management
Renewal management refers to an existing tenant wanting to renew an
existing contract which is close to expiry. The process cannot be seen
in isolation. For example, the chances of a renewal are much enhanced by
operating a quality maintenance
program.
Assured Shorthold Tenancy contracts 'carry over' once they have expired.
So, if the landlord and tenant do not renew, there is no legal problem.
However, it does decrease the security of tenure for both landlord and
tenant. Either can give notice to leave at any time. Some advocate this
as being excellent. Buy2Let recognise there is an advantage to the
landlord in the sense that problem tenants can be evicted quicker.
However, if the tenants have been selected properly and managed
correctly, the likelihood of needing formal eviction proceedings is very
low. Buy2LetExpert has never had to evict anyone formally in almost 20
years.
Renewing a contract formally gives an opportunity to engage with a
tenant. It forces the tenant to think about the future. Encouraging this
process can be good for the landlord. An example might be a tenant who
states in late September they wish to move out in about 3 months or so.
In this case the landlord can plan by doing a few jobs and maybe some
decoration. Buy2LetExpert has meanwhile noticed that writing a new
contract for 3 months is not good as the expiry would be at Christmas
time. The property will not let over Christmas. Consequently the
landlord suggests a 2 month or 4 month contract to avoid the
Christmas/New Year slack letting period. Such a strategy reduces the
chance of voids and reduced income. If the tenant is not happy then
the alternative is not to renew at all. A re let in September is no
problem. Compare this with a contract that has 'carried over' (beyond
its term). The tenant can give one month’s notice at any time. The end
of November is quite possible. A re let one month later (Christmas time)
will, however, be impossible and a void with consequential lost rent
is inevitable. This is one reason why Buy2LetExpert also recommend
the additional administration involved in forming new contracts once the
old one’s have expired while recognising there are disadvantages
regarding ease of eviction of problem tenants.
An additional reason why Buy2LetExpert would always recommend a formal
renewal of the contract is because this gives an opportunity to
review the rent, thereby maximising
investment returns.
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