Section 21 notice expiring soon, tenant relationship breakdown & looming Section 24 loss. Advice needed.
I’m looking for some perspective on a complex tenant situation. I have excellent, long-term tenants of nearly 10 years who have always paid on time. Because I was on a low interest-only rate, I rarely increased the rent. However, that rate expires in a few months, and between the new mortgage costs and Section 24 tax exposure, keeping the rent as-is will put me deeply into a monthly loss.
The Backstory:
Initially, I planned to redevelop the property (loft/rear extension), which fell through due to planning. I then served a Section 21 notice earlier this year with the intention to sell. Due to shifting market conditions, I recently decided to retract the notice which I haven't informed her yet, renovate down the line instead, and implement a rent increase (which would still sit about 25% below market rate).
The Complication:
When I met with the tenants to discuss this, the wife informed me that she and her partner have split. He is moving out and only paying up to the original notice expiry date. She claims she can cover the rent alone (potentially with housing benefits) and wants to stay. However, during my visit, I noticed the property’s condition has deteriorated significantly (poor garden maintenance, cleanliness issues and she also appeared to be struggling personally/physically.
The Dilemma:
The Section 21 notice expires at the end of this month. If I don't apply for a court order now, I lose that leverage. I am caught between two choices:
Enforce the notice, apply for the court order, and prepare for a few months of potentially no rent/eviction proceedings.
Offer her a new tenancy agreement at the increased rate (perhaps adding one of her working-age children to the agreement for financial security).
Given the relationship breakdown and property condition, I’m worried I’m opening a can of worms if I let her stay. How would you proceed?