Rented properties - an asset or a liability?

A REGULATED tenanted property is generally considered to down value the farm, but that is not always the case.

Regulated tenants, otherwise known as protected, statutory or “fair Rent Tenants” are agricultural employees who may have been made redundant, or have retired, but have been in occupation of the farm cottage since before January 15, 1989 and therefore have protection under the “Rent (Agricultural) Act 1976” as a ‘sitting tenant’.

Speculate

Opportunities now present themselves for a keen investor prepared to speculate. While the “buy-to-let” properties have taken a real knock, now may be the time that these same investors are looking to purchase regulated tenanted properties. Prior to 2007, because we were in a rising property market, discounts of 25 to 30 percent from the Vacant Possession Value applied, however, property prices have fallen and discount is now likely to be 40 percent.

Regulated tenanted properties on farms are a saleable asset, given the right location, tenant profile and fair rent paid, giving a gross yield of 5% to the investor, which is extremely attractive, particularly as there are no period when the property is empty, with this form of tenancy. This is excellent news for land and property owners wanting to realise capital from surplus tenanted properties.

Many sitting tenants are senior citizens aged 65 plus, the surviving husband or wife of a sitting tenant can succeed automatically to the tenancy. Other family members, son or daughter, of the tenant, provided they have lived in the property for at least two consecutive years before his/ her death, can succeed to the tenancy as an “Assured protected tenant” with the security of tenure – but the rent that is charged is a ‘market rent’ as opposed to a regulated tenanted rent but they must pay a higher rent (market rent) as opposed to the regulated tenant rent.

The regulated sitting tenants pay a fair rent, which is fixed by the Valuation Office Agency, a government body, and the rent can be reviewed every two years.

If a farm landlord of a protected regulated tenanted property is thinking of selling, it is extremely important to provide as much information as possible in relation to the tenant profile.

In many cases with a retired agricultural employee there has been a very long-standing personal relationship with the landlord. In the event of the property being sold, it is extremely important for the landlord to be assured that tenants would not be approached to take money to vacate or be pressurised to buy, as sitting tenants.

References

It is essential that prospective investment purchaser has a reputation as a responsible residential landlord and in his respect, references should be requested either directly from the inquiring company, or if a charted surveyor is acting on their behalf, they can provide these.

In some cases, in the direct approach, the prospective investment purchaser, or the surveyor acting on their behalf will confirm there does not have to be an inspection of the property, or disturbance whatsoever to the sitting tenant. Hence, the reason for as much information to be provided by the landlord about the property and its occupants and, of course, to confirm that the property is generally in good and tenantable order. In most cases, the sitting tenant will have looked after the property as if it was their own home and this is extremely advantages to a prospective investment purchaser.

For expert, tailored advice, contact:

Barry Davies BSc (Agric), MRICS, FAAV, IRRV
Davies & Co., Chartered Surveyors
📞 01536 524808
📧 info@daviesandco.co.uk
🌐 www.daviesandco.co.uk