Rent paid upfront

Louise1919

Hi all,

We've just sold our house, the house we were buying fell through and so we'll have to rent for about a year.

We won't pass the affordability test so we're thinking of offering either 6 or 12 months rental upfront from the equity. However in these uncertain times we're worried about the landlord defaulting on their mortgage and the house being repossessed. Is there any insurance we can get so that we can ensure that the rental is secure and can't be 'lost'? I haven't been able to find anything.

Thank you.

secla

if your have a 6 or 12 month tenancy and the property gets repossessed i believe the lender then becomes your Landlord until such time as they can evict at the end of your fixed term, As long as its written into your agreement that payment is made in advance i cant see how they could evict your before that

eddddy

There are 2 things you can investigate in relation to this:

1. Choose a landlord who has no mortgage - I think the stats are that around 50% of landlords don't have mortgages

• If your landlord goes bankrupt, the administrator will probably try to sell the property with you as tenants, so you'll end up with a new landlord

• Your tenancy agreement (and your rights) should remain unaltered through all this

2. If you're landlord has 'consent to let' for their residential mortgage or a BTL mortgage, your tenancy should become binding on the mortgage lender following a repossession. So:

• The mortgage lender becomes your landlord

• The mortgage lender will probably try to sell the property with you as tenants, so you'll end up with a new landlord

• Your tenancy agreement (and your rights) should remain unaltered through all this

If the property is sold, your new landlord might be better or worse than the original landlord. (If the original landlord is repossessed/bankrupt, they will have been in financial difficulties for some time - so probably won't have been fixing problems etc.)


If you have a  'dodgy' landlord who has residential mortgage and didn't get 'consent to let' - your tenancy isn't binding on the mortgage lender, so they have more power to evict you.

A 'good' letting agency should check that a landlord has 'consent to let' (or a BTL mortgage) before advertising their property - but not all letting agencies are 'good'.



Some more info: 
https://www.citizensadvice.org.uk/housing/renting-a-home/repossession-by-your-landlord-s-mortgage-lender/
https://england.shelter.org.uk/housing_advice/repossession/when_your_tenancy_is_binding_on_the_landlords_mortgage_lender

theartfullodger

A "good"letting agent eh?   Didn't know there more than a few of them.  In over 22 years as a landlord I was NEVER asked by any agent if my mortgage had permission to rent out   

(As it happens, always did or no mortgage).

To be a lettings agent in England requires no qualifications, no training, no criminal records check.  The whole agent's staff could be ex-prisoners enjoying their freedom from being banged up for fraud and GBH.  With no knowledge of lettings at all.  Literally!

Mind you, AFAIK also true of MPs....

dimbo61

With recent rulings from a judge any money paid over 5 weeks rent ( deposit ) is also now classed as a deposit and not advanced rent and therefore needs to be registered as a deposit.
However you can't take more than 5 weeks rent as a deposit !
So Landlords taking 6/12 months rent in advance are on a very sticky wicket

theartfullodger

dimbo61 said:

With recent rulings from a judge any money paid over 5 weeks rent ( deposit ) is also now classed as a deposit and not advanced rent and therefore needs to be registered as a deposit.

Kindly provide link to court report, please.

housebuyer143

I believe it's prudent to find out if they have a BTL mortgage. If they do the lender would be bound by the terms of the tenancy agreement if they repossessed it. If they don't and are renting it on a residential mortgage, I believe the lender doesn't have to recognise your agreement and can get a court order to evict you at any time.

I worked in a letting agent for 10 years and years of maybe two properties that were repossessed while the tenants were there. I don't think it's something you need to worry about too much. 

sourpuss2021

dimbo61 said:

With recent rulings from a judge any money paid over 5 weeks rent ( deposit ) is also now classed as a deposit and not advanced rent and therefore needs to be registered as a deposit.
However you can't take more than 5 weeks rent as a deposit !
So Landlords taking 6/12 months rent in advance are on a very sticky wicket

I have not heard any serious reports of this being true.  It just seemed like a wilful misinterpretation.

OpenRent still state the opposite:

https://help.openrent.co.uk/hc/en-gb/articles/115002729071-Can-my-tenant-pay-multiple-months-rent-in-advance-

Grumpy_chap

Louise1919 said:

Hi all,

We've just sold our house, the house we were buying fell through and so we'll have to rent for about a year.

We won't pass the affordability test so we're thinking of offering either 6 or 12 months rental upfront from the equity. However in these uncertain times we're worried about the landlord defaulting on their mortgage and the house being repossessed. Is there any insurance we can get so that we can ensure that the rental is secure and can't be 'lost'? I haven't been able to find anything.

Thank you.

Some landlords are wary of the "rent upfront" offers because it can be the favoured approach of certain gardeners who are trying to discourage any kind of ongoing contact from the LL.

dimbo61

https://www.property118.com/judge-declaring-anything-in-advance-as-a-deposit/

martindow

dimbo61 said:

https://www.property118.com/judge-declaring-anything-in-advance-as-a-deposit/

This is a question posed hypothetically, not a report on a judgement actually made.