The thought of a large farmhouse coming back in-hand can ﬁll some landowners with dread.
Ever increasing legislation surrounding residential tenancies means the cost of bringing them up to modern letting standards can be high, particularly if they have been occupied by long-term tenants. The introduction of Private Residential Tenancies in Scotland last year, eﬀectively giving tenants security of tenure, is a further deterrent to many residential landlords.
For many of our clients in the central belt of Scotland, we have been branching out from purely residential leases for such properties and letting them on semi-commercial leases to children’s care charities. This is a good news story all round. This type of lease presents an opportunity for a strong and secure income stream to the landowner while supporting a charity helping local children.
Under a purely residential tenancy, the landlord must undertake all renovation work on a speculative basis with no guarantee of a good long-term tenant on completion, but under a care-home lease, the speciﬁcation of the property can be agreed up front with the charity, in the knowledge that there will be a tenant in place on a strong rent for ﬁve to 10 years.
Rental levels achieved are often higher than those under a purely residential tenancy, due to the diﬃculty for charities of ﬁnding suitable properties on a long-term basis and the perceived risk of damage to the property. Under a well-structured lease the charity is responsible for ensuring these concerns are addressed, and both parties know who is responsible for each aspect of repairs and maintenance.
The charities look for rural properties large enough to accommodate three children and at least one carer overnight, so large farmhouses are ideal. The house beneﬁts from being well heated and maintained by the charity, which can be a concern when letting such houses under residential leases due to the relatively high running costs.
The landlord is not absolved of all maintenance responsibility, but the charities often undertake some general maintenance work through their in house teams. In contrast to a residential lease, there is no concern over potential void periods in winter, when security and burst pipes can be a concern.
One of our clients which operates such leases is Caledonian Estate, near Glasgow. It has one tenancy to a care charity which has been in place for more than 10 years and is negotiating with another charity over substantial renovation of a former farmhouse, which will be let to house three children for 10 years.
Caledonian Estate’s Rich Oliver said: “We are delighted that through our tenancy to the care charities, we are in a position to oﬀer these young people somewhere they can call home. The cost of the renovations required to the house are substantial, and as a business, it is reassuring to know that we have a secure long-term tenancy agreed before committing such expenditure.