Guaranteed rent through Company Let. How do we pay high street agent Letting fee?

cherrytree123

Hi all, we will soon be first-time landlord and would like some advice please. We have gone through a high-street agent to put our house up for rent, initially thinking the 'fully managed' option and hoping a nice family would move in. So far though no families have come through, but we've had 4 viewings and all turned out to be company lets (2 of which have made offers). They want to rent our house on a long-term 'guaranteed-rent' basis then turn it into a HMO and rent out the rooms to individuals. They will deal with getting HMO license, finding tenants and any on-going maintenance issues. We quite like the idea.

Now as it's 'guaranteed rent' and everything will be managed by the Letting company, we asked the high-street agent how it would work with them - would they be charging a one-off introduction fee, rather than a monthly letting fee? Their response was 'If you decide to go ahead with the company let and prefer to switch to let only, we can arrange this for you.'  Let-only is better than Fully-Managed in this case, but really do we have to pay this monthly Letting fee for the duration of the 3-5 years lease? Doesn't really make sense to us. We have reasons to believe the high street agent will also be charging the let company £1995 deal referral fee. 

We're new to all this so not sure how to proceed. Is this an unusual situation? If not, what's the standard practice please, any advice on this would be much appreciated. Thank you.

theartfullodger

The old "guaranteed rent" scheme/scam.  I'd not trust that with any of my properties.

Ask agent if they'll provide a personal guarantee as well from a credit checked director.

[Deleted User]

Is the property mortgaged? If so does your mortgage allow you to set up a commercial let rather than an AST? Does your insurance cover you for commercial tenancies? How can end the contract with the company and end the subletting? 

cherrytree123

We have looked up the 2 companies and one looks to be very well established (we checked companieshouse, their company website, & facebook page, customer reviews, and spareroom.co.uk). The other might be owned/run by one person and only started last year but the director did mention in his offer 'the contract should be between yourselves/landlord and my company, if needed I am prepared to give a personal guarantee and am more than prepared to under go a credit check and show business funds which I have invested in the business'.

If we were to go with one of these companies, how do we pay the high street agent?

cherrytree123

@Lover_of_Lycra. We're looking to move into a new home and want to put our current home up for rent. So we have 2 mortgage offers, one for the new purchase and the other BuyToLet for our current home. The current BTL offer doesn't allow multi lets so we're looking at how much it'd cost to switch to a HMO mortgage instead. We haven't looked at insurance yet.. 

tom9980

cherrytree123 said:

We have looked up the 2 companies and one looks to be very well established (we checked companieshouse, their company website, & facebook page, customer reviews, and spareroom.co.uk). The other might be owned/run by one person and only started last year but the director did mention in his offer 'the contract should be between yourselves/landlord and my company, if needed I am prepared to give a personal guarantee and am more than prepared to under go a credit check and show business funds which I have invested in the business'.

If we were to go with one of these companies, how do we pay the high street agent?

Ask them? Frankly you are way out of your depth.

To give you an example of what may happen, Company opens and runs a successful business for 10 years accumulating 20 or so properties with lots of good feedback for 5-10 years, then all of a sudden in the final year they stop paying rent to the owners of all the properties while pocketing all the cash, when enough of the owners start chasing them for the cash they declare the business bankrupt and fold it owing a six figure sum to all the owners. Once the owners regain possession they find their properties have had no maintenance done in the final years at all and need significant investment.

You honestly should know this by now which really tells us you have utterly failed to do due diligence and properly research being a Landlord.

cherrytree123

@tom9980 @theartfullodger Does this happen often? You did mention you wouldn't trust this old "guaranteed rent" scheme/scam with any of your properties.. But what are the chances these companies are genuine and things will actually go to plan? Are you suggesting we should not consider this at all and hold out hoping a nice family would come along

SpiderLegs

Ooh look. Guaranteed rent, no hassle, no maintenance, personal guarantees. Sounds brilliant doesn’t it.

Surely you aren’t that naive?

What has your solicitor said about the contract these companies have provided you with?

Not that it will matter when they shut themselves down, run off with your cash and leave you with the mess to sort out.

eddddy

cherrytree123 said:

Hi all, we will soon be first-time landlord and would like some advice please. We have gone through a high-street agent to put our house up for rent, initially thinking the 'fully managed' option and hoping a nice family would move in. So far though no families have come through, but we've had 4 viewings and all turned out to be company lets (2 of which have made offers). They want to rent our house on a long-term 'guaranteed-rent' basis then turn it into a HMO and rent out the rooms to individuals. They will deal with getting HMO license, finding tenants and any on-going maintenance issues. We quite like the idea.

Now as it's 'guaranteed rent' and everything will be managed by the Letting company, we asked the high-street agent how it would work with them - would they be charging a one-off introduction fee, rather than a monthly letting fee? Their response was 'If you decide to go ahead with the company let and prefer to switch to let only, we can arrange this for you.'  Let-only is better than Fully-Managed in this case, but really do we have to pay this monthly Letting fee for the duration of the 3-5 years lease? Doesn't really make sense to us. We have reasons to believe the high street agent will also be charging the let company £1995 deal referral fee. 

We're new to all this so not sure how to proceed. Is this an usual situation? If not, what's the standard practice please, any advice on this would be much appreciated. Thank you.

This all sounds very suspicious - are you sure your letting agent really has been looking for tenant families, or have they only been looking for "rent-to-rent" companies because the "rent-to-rent" companies pay the letting agent a £1995 finders fee?

And why is the letting agent wanting an ongoing monthly fee for finding a tenant? The landlord would normally just pay a one-off fee of about one months rent. (You normally only pay a monthly fee if you're getting a fully managed service.)

Are you sure that you're not being scammed by a dodgy letting agent, who's recommending their dodgy friends who run dodgy "rent-to-rent" businesses?

cherrytree123

@SpiderLegs We're still considering and haven't mentioned to our solicitors, many things still up in the air. The house has been on the market for 2 weeks and so far no families have come through... which might be kind of expected as we're on a main road (that's one reason we're moving, now with children we want to be in a more residential area). Are you also saying we shouldn't consider this 'guaranteed-rent' companies at all. If no families come through, would we be better off trying to run the HMO ourselves? We both work full time and with 3 children so would prefer not having to do that.

tom9980

cherrytree123 said:

@SpiderLegs We're still considering and haven't mentioned to our solicitors, many things still up in the air. The house has been on the market for 2 weeks and so far no families have come through... which might be kind of expected as we're on a main road (that's one reason we're moving, now with children we want to be in a more residential area). Are you also saying we shouldn't consider this 'guaranteed-rent' companies at all. If no families come through, would we be better off trying to run the HMO ourselves? We both work full time and with 3 children so would prefer not having to do that.

Why are you trying to run a business when you seem to have done no research into said business? why are you not selling it and using the money for an onward purchase or investing in your pension? you really are going to get burnt either by this scenario or by a professional tenant who will think nothing of ripping you off.