A landlord gets their income from taking rental payments from their tenants. But sometimes, accepting rent is not what you want to do. This is where ‘mesne profits’ come in.
A landlord can only enact section 8 in certain circumstances, usually when their tenant is in breach of contract. When the notice runs out, the tenancy is over. If the tenant does not leave on or before the expiry date, the matter goes to the courts.
Accepting rent creates a tenancy
Under section 54(2) of the Law of Property Act 1925, an interest in land (in this case, a tenancy) can be created “by parol” by accepting a market rent. “By parol” means that the interest need not be created by a written deed.
In other words, accepting rent creates a non-written tenancy agreement. If a landlord accepts rent after the expiry of a Section 8 notice has terminated a tenancy, a new tenancy takes its place.
This might result in a court throwing out a possession claim.
Mesne profits allow landlords to continue taking money
Mesne profits (pronounced ‘mean’ profits) are sums of money that a rightful landowner can take from a tenant who does not have permission to occupy their property. They represent the value that the tenant derives from the property while they continue to occupy it.
The eviction process can be lengthy an expensive. During the process, a landlord can neither re-let the property nor accept rent. Mesne profits, or ‘occupation charges’, exist as a substitute. They are equivalent to a market rent, and paid for the length of time a tenant occupies a property without permission: i.e. from the expiry of a section 8 eviction notice to the date they actually leave.
How to accept rent as mesne profits
If a tenant does not leave after the expiry of a section 8 notice, 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.
Ask the tenant to sign the letter, preferably in the presence of a witness, and keep a copy for your records. If you send it by post, send it by recorded delivery and get proof of postage.
Mesne profits are also useful for common law tenancies
Some tenancies do not fall under the Housing Act 1988. Instead of a section 8 or section 21, a landlord ends a common law tenancy using a ‘notice to quit’.
A notice to quit also terminates a tenancy agreement. After notice expires, you should accept rent as mesne profits so as not to jeopardise eviction.
What about after a Section 21?
A section 21 notice is only valid for:
- in the case of a fixed-term tenancy, six months from the date of issue
- in the case of a periodic tenancy, four months from the date of issue
The expiry of a section 21 does not end a tenancy. Continuing to accept rent should not prejudice your right to claim possession under a section 21. For the avoidance of doubt, though, you may wish to refer to post-section 21 rent payments as mesne profits.
Remember: if you are ever unsure of any of the legal aspects of tenancy management, seek advice from a legal professional.