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Landlord’s guide to mesne profits

When you’ve got a bad tenant, getting rent can sometimes feel like getting blood from a proverbial stone. There’s a perverse flipside to this, however, where taking rental payments is actually not what you want to do.

This all comes down to an important distinction between Section 8 and Section 21 notices; whilst a tenancy doesn’t end when the latter expires, the former can only be enacted when the tenant has breached the contract and its expiry effectively does terminate the tenancy. After this point, if the tenant stays put, the matter goes to the courts.

It’s accepted that, if a landlord accepts rent, a tenancy is in effect – and as the expiry of a Section 8 notice terminates the old tenancy, continuing to accept rent effectively creates a new one. This means that accepting rent from a problem tenant you are trying to evict might get your possession claim thrown out of court, even if you aren’t evicting them for an arrears-related breach.

Mesne profits

This is where ‘mesne profits’ – pronounced to rhyme with ‘bean’ rather than with ‘Chesney’ (for fans of the One and Only Mr. Hawkes) – come in.

The eviction process can be lengthy, and is sure to erode your bottom line. You can’t re-let the property and you can’t accept rent. However, mesne profits – otherwise known as ‘occupation charges’ – exist as a substitute; by paying them, a tenant effectively reimburses the rightful landowner (you) for occupying the property when they didn’t have permission to, i.e. from the date the notice expired to the date they actually leave.

If a tenant is still hanging around after a Section 8 notice expires, you should write to them requesting that they continue to pay an occupation charge at the sum of the original monthly rent. Advise that this will be accepted as mesne profits and should not be taken as the intention to create a new tenancy. Remember to send the letter by recorded post and keep a copy of it for your records.

What about after a Section 21?

Contrary to popular belief, a Section 21 doesn’t have a time limit. It’s effectively indefinite, and as I said earlier, its expiry doesn’t end the tenancy like a Section 8’s does.

Continuing to accept rent shouldn’t prejudice your right to claim possession under a Section 21. However, some landlords like to err on the side of caution and refer to post-Section 21 rent payments as mesne profits regardless. If you’re in any doubt, it’s advisable to do this – and remember that you can always seek legal advice if you’re unsure of anything.

If Chesney Hawkes is now stuck in your head, feel free to request an apology in the comments section below.

Read the original blog entry...

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Amelia Vargo is an online marketing executive for CT Capital. Amelia writes for Turnkey Mortgages, Turnkey Landlords, TurnKey Bridging, TurnKey Life and Commercial Trust.

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