Paying rent in advance- possible problems

[mrmoose]

Hi, I am due to sign a tenancy agreement later in the week to rent out a property. As I am a student, the lettings agent asked for the rent for the fixed term period (in this case 6 months) to be paid in advance. I have no issues doing this, but I have a few questions about how I can best act to secure my money. The amount I'm paying upfront is quite large (£9k), and I've been looking stuff up, but I could do with some opinions.

Should I attempt to get the agent to change the AST to include a clause stating that any rent paid in advance should be returned? I've read that in the case of a surrender of the property, any rent paid in advance would not be returnable. I realise this may be the case if I were to surrender the property, but what if the landlord were to surrender it? Or if a section 8 was brought against myself if the landlord went into arrears on the mortgage? Would this still hold true?

I've attempted to cover my back by asking the agents if they wouldn't mind asking the landlord to inform me about whether he was on a mortgage or not, but they point blank refused to even ask him, telling me it was none of my business.

Any advice people could give me about how to safeguard my money would be appreciated. I'm aware that financially, things may get ropey for all in the future, and I wish to minimize any risk I take.

Thankyou

[Snorkerz]

You can find out if there is a mortgage on the property by paying £4 to the landregistry website. It will show who has a charge over the property.

You can then attempt to find out from the lender (no idea if they will tell you) if they have given permission to let.

If they have, they are bound by your tenacy agreement
If they haven't, they're not.

You are unlikely to get the agents to change the tenancy agreements - thay like to have them all the same so that don't have to check for changes every time they do something.

If you had the fund available, how about this as a counter suggestion to their 6 months requirement...

You will pay 3 months up front and a deposit equal to 4 months rent. That way, your deposit will have protection from one of 3 government approved schemes (preferably DPS), if the property is repossessed it will be at least 3 months before you're evicted but the down side is that you will have to pay rent from the 4th month. Obviously, at the end of the tenancy, you get the deposit back.

[mrmoose]

You will pay 3 months up front and a deposit equal to 4 months rent. That way, your deposit will have protection from one of 3 government approved schemes (preferably DPS), if the property is repossessed it will be at least 3 months before you're evicted but the down side is that you will have to pay rent from the 4th month. Obviously, at the end of the tenancy, you get the deposit back.

Thanks for the quick response. I thought about asking if I could put more into the deposit instead, but I've read that more than 2 months rent as deposit constitutes a premium? Admittedly, I am no expert on this, so it's more than possible I'm getting the wrong end of the stick! I'll have a look on the land registry website, it's a London property, and the landlord apparently has several, so I'm guessing it's mortgaged. Does the land registry state the company it's mortgaged with though?

[mariner]

mrmoose I applaud your diligence & question, but I fear there is no simple solution.
1 You are a student, yet appear to suggest you will want to move within 6 month fixed term. Most student lets are for 10-12 months. You cannot terminate T during fixed term AST without mutual consent. Any unilateral vacation would leave you liable for fixed term rent. So if you pay 6 month rent in advance, don't expect any refund.
2 Land Registry Deeds should show any charges on property eg Mort Co
3 3 month rent + 4 month deposit option. Whilst dep remains your money, 2 months may be the max allowed and you have no guarantee LL will return without a fight. Since LL cannot access deposit before end of T you are required to make rent payments when due after 3 months
If you pay 5 month rent in advance then AST should reflect this. The rent payment period would be 6 months with implications for both T & LL.
I would suggest offering paying 1 month renr in advance, 2 month rent as deposit with employed, property-owning guarantor

[Snorkerz]

I thought about asking if I could put more into the deposit instead, but I've read that more than 2 months rent as deposit constitutes a premium?

That is a popular misconception. It is very possible that the landlord has heard similar which may disuade him from agreeing. In the case of a tenancy that is created AS a periodic tenancy, it is true, but yours would start as a fixed term tenancy wih the potential to evolve into a statutory periodic tenancy. Westminster explains it in this link and shows the relevant bits of law.

http://www.landlordzone.co.uk/forums...591#post324591

[Lawcruncher]

See also this thread: http://www.landlordzone.co.uk/forums...fore-it-is-due

[mrmoose]

mrmoose I applaud your diligence & question, but I fear there is no simple solution.
1 You are a student, yet appear to suggest you will want to move within 6 month fixed term. Most student lets are for 10-12 months. You cannot terminate T during fixed term AST without mutual consent. Any unilateral vacation would leave you liable for fixed term rent. So if you pay 6 month rent in advance, don't expect any refund.

Thanks everyone again for the advice. I don't plan on moving during the 6 month term- quite the opposite, I'd like to stay there for as long as the landlord will want (several years would be nice). So I'm hoping after the 6 months it'll just roll over onto a periodic with no problems. As an aside, though the lettings agency did start saying that after 4 months they wanted to re reference me, and for me to sign another 6 month AST, and pay another 6 months upfront. That's something that I'm not entirely happy doing, but I imagine I'll have more leverage on that once I'm actually in the house.

I've tried asking them if they will amend their conditions, in terms of an increased deposit, or decreased rent upfront, but no. It's quite irritating as I have two homeowning outright guarantors that both individually earn more than 30x the monthly rental amount (their criteria), and I myself am a homeowner outright (and a landlord). I guess renting is so competitive that they can make these stipulations, and if I don't like it, they can easily find someone else.

So any termination during the fixed term would have to be by mutual agreement- i.e. one or the other of us would have to "surrender" the house? If I was in the position where he surrendered the contract, surely I could probably refuse it unless I had written in writing that my money was to be returned?

The thing that I'm really worried about is the landlord getting a s8. I'm probably being overparanoid, but how easy would it be for him to wait until he had the full money, then launch a s8, based on one of the more vague reasons (furniture degrading, or something)? It'd be an easy way for him to pocket several months rent, and then relet the property, but is it actually plausible that he could such a thing? How much evidence would he need etc.? (I'm a very good tenant really- no loud music, no nails in walls, no muddy shoes!)

Finally, if the mortgage company did reposess the house, am I right in thinking it'd take 3 months until I actually had to vacate the property?

Sorry for all the questions, and thanks again for the assistance

[westminster]

Hi, I am due to sign a tenancy agreement later in the week to rent out a property. As I am a student, the lettings agent asked for the rent for the fixed term period (in this case 6 months) to be paid in advance.

You really need to read lawcruncher's link in post #6. What does the contract say about when rent is payable? Does it say it is payable monthly or six-monthly? (If the latter, then, if the tenancy becomes periodic following fixed term expiry, the periods of the tenancy would be six months long - that would mean you could only give notice to quit expiring at the end of a six month period).

Does the land registry state the company it's mortgaged with though?

Yes, it would say who has a charge over the property. If it doesn't, then it means there's no mortgage.

So any termination during the fixed term would have to be by mutual agreement- i.e. one or the other of us would have to "surrender" the house? If I was in the position where he surrendered the contract, surely I could probably refuse it unless I had written in writing that my money was to be returned?

Not 'one or other'; the LL cannot 'surrender' the tenancy contract. For there to be a surrender, T must offer, and LL must accept.

The thing that I'm really worried about is the landlord getting a s8.

A s.8 notice is not served on the LL, but the T.

I'm probably being overparanoid, but how easy would it be for him to wait until he had the full money, then launch a s8, based on one of the more vague reasons (furniture degrading, or something)? It'd be an easy way for him to pocket several months rent, and then relet the property, but is it actually plausible that he could such a thing?

No. It is extremely unlikely that LL could obtain a possession order under s.8's discretionary grounds without any evidence to support the claim. In addition, eviction procedure is lengthy - LL would have to serve notice within a couple of months to have any hope of obtaining a possession order before fixed term expiry.

Finally, if the mortgage company did reposess the house, am I right in thinking it'd take 3 months until I actually had to vacate the property?

If a mortgage lender obtained a possession order against you, you can apply for it to be postponed for two months. See http://www.communities.gov.uk/public...essionguidance

I've tried asking them if they will amend their conditions, in terms of an increased deposit, or decreased rent upfront, but no. It's quite irritating as I have two homeowning outright guarantors that both individually earn more than 30x the monthly rental amount (their criteria), and I myself am a homeowner outright (and a landlord).

All the rent up front, plus a deposit, plus two guarantors, plus you're a homeowner and own other properties? This strikes me as an absurd degree of caution on the part of the agent/LL.

[mrmoose]

You really need to read lawcruncher's link in post #6. What does the contract say about when rent is payable? Does it say it is payable monthly or six-monthly? (If the latter, then, if the tenancy becomes periodic following fixed term expiry, the periods of the tenancy would be six months long - that would mean you could only give notice to quit expiring at the end of a six month period).

.....
All the rent up front, plus a deposit, plus two guarantors, plus you're a homeowner and own other properties? This strikes me as an absurd degree of caution on the part of the agent/LL.

Thanks for the advice. Yes, it is quite absurd- I've been a tenant many times before, and have glowing references- I always pay my rent/utilities on time, treat other's houses as if they were my own etc. As I know how unpleasant it can be when tenants don't take care. Admittedly I am a student, but I'm a 22 year old (so I class as mature) medical student, who already has a degree, and has a reasonable income from investments. I think it's because of my student status, and the agents not being used to it, but it is grating.

I emailed the agents and explained to them the risk regarding fixed periods, telling them that the contract would have to be amended to register that the 6 month payment was to be allocated to six discrete monthly periods, and asking for a draft copy of the contract. Problem- they didn't confirm that they would do this (just gave me a lecture on what an AST was, which was nice, but quite unnecessary, and I get enough lectures at uni really! ) more worryingly, they are reluctant to supply me with a draft copy of the contract. Considering my move in date is this Saturday, I'm not sure when they're actually going to allow me to see the contract (Friday night possibly?!) but I'm starting to get worried. They've seemed quite inept previously, repeatedly asking for information (eg passport scans) that they've already recieved, but can they actually refuse to give me a draft of the contract until the day before (at which point changing anything on it in time for the moving date will be near impossible)?

Can anyone give me any advice as what to do? I'm in half a mind to just give up and look for somewhere else, but I'd lose nearly £400 in a holding deposit and referencing fees.

[westminster]

...more worryingly, they are reluctant to supply me with a draft copy of the contract. Considering my move in date is this Saturday, I'm not sure when they're actually going to allow me to see the contract (Friday night possibly?!) but I'm starting to get worried... but can they actually refuse to give me a draft of the contract until the day before (at which point changing anything on it in time for the moving date will be near impossible)?

Can anyone give me any advice as what to do? I'm in half a mind to just give up and look for somewhere else, but I'd lose nearly £400 in a holding deposit and referencing fees.

The holding deposit ought to be refundable - even if they say it isn't; see this post by one of our legally qualified members (who happens to be lawcruncher): http://www.landlordzone.co.uk/forums...3090#post93090
(so, you could probably claim against the agent to get it back if need be).

I think what I'd do is write an email first thing to the agent, stating that you require to see the draft contract by close of play tomorrow, Tuesday. In addition, specify the terms which you require, i.e. in respect of when rent is payable.

If you read lawcruncher's post linked to in #6, then you will see that you could be at a potential disadvantage* if you pay rent in advance of when it is actually due, so if you're paying six months up front, the contract should say that this whole amount is payable on day one; but you also wish to avoid creating six monthly tenancy periods following on from the fixed term, so if there is any likelihood that you will wish to continue the tenancy after the fixed term, then the contract must be amended to avoid this - as lawcruncher suggests, one possibility is to create a seven month term, with the first payment for six months, and the second payment for one month.

If you decide to proceed, it would be inadvisable to sign the contract OR to move in before you have read the contract through in detail and are satisfied with the terms. Worst case scenario, - for example, if they give you the contract to sign on move in day - then cross out/amend any terms you aren't happy with, and sign next to each amendment. The agent maybe won't hand over the keys when he sees your amendments, but maybe he will...

*I have to say that I think it's quite an unlikely scenario, albeit possible, that LL would sell up mid-fixed term, fail to pass on the advance rent you'd paid to the buyer, and that the buyer/new LL would then demand further rent...(it's the first time it's come up as an issue in my 2.5 years on the forum). In your shoes, I would regard it as a more likely risk to have the contract say that rent is payable in advance six monthly and potentially end up with six monthly tenancy periods in a periodic tenancy. In short, if the agent won't agree to your terms, but you nevertheless want to proceed with the tenancy, I'd personally go with rent payable monthly and paid up front before it's due, as the lesser of two potential evils.