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Having tenants who refuse to leave despite being given a valid Section 21 or Section 8 notice is a nightmare for a landlord and places them in the unwanted position of having to evict the tenants. To do this, the landlord will need to incur costs upfront, even if they are ultimately able to recover these from the tenants. It is important that the landlord follows the correct procedures for evicting tenants to avoid being guilty of harassment.
Costs
The landlord will need to apply to the court for a possession order. If they are not seeking rent, they can apply for an accelerated possession order which costs £404. This is usually a quicker route to recovering the property as it does not need a court hearing. The landlord may also incur associated legal or professional costs.
If the landlord is also seeking recovery of unpaid rent, they will need to take the standard possession order route. The claim can be made online and also costs £404. Again, the landlord may also incur legal costs.
The tenants have two weeks to respond to the application after which the landlord can request the possession order. The hope is that the tenants will move out by the date stated on the possession order. If they do not do so, the landlord will need to apply for a warrant for possession, which costs £148 plus any associated legal fees.
Once the warrant has been issued, the landlord will be sent notice EX96 which will state the date of the eviction. It is important that the landlord returns this form to confirm the eviction. The landlord may opt to transfer the warrant to the High Court to secure a writ of possession. This will enable a High Court enforcement officer to evict the tenants, which may result in a faster eviction. This costs £123 (plus any associated legal fees), but may be worthwhile.
The landlord should keep records of all costs incurred.
Tax relief
The way in which relief is given depends on whether the costs are capital or revenue – confusingly, legal and professional costs can be either, as they follow the nature of the item to which they relate. Consequently, the way in which tax relief is given depends on why the landlord is evicting the tenant.
If a landlord is evicting a tenant for breach of the tenancy agreement and is to re-let the property once the tenant has left, the cost of evicting the tenant is revenue expenditure which can be deducted in calculating the rental profit to the extent that it is not recovered from the tenant.
However, if the landlord has issued a Section 21 notice to reclaim the property to sell, the cost of evicting the tenant is capital expenditure and is deducted as a cost of sale when working out the capital gain or loss on disposal.
If the landlord is able to recover costs under an insurance policy, the insurance proceeds must be taken into account as well as the costs.
In the event that the tenants have unpaid rent, which is recovered, either from the tenants or under an insurance policy, the recovered rent or insurance proceeds must be taken into account in calculating the taxable rental profit.
Partner note: HMRC's Property Income Manual at PIM2120.