Can letting agent keep full year's rent paid in advance?

Eebe

ArbitraryRandom said:

Another concern is the 6 month break clause - generally they operate both ways, so your tenants can leave at 6 months (at which point you would need to return to them their overpaid rent). 

That's fine. I'm happy to pay it back if they leave. We won't spend it until it is 'earned', if indeed there's much left after all the fees are paid!

Eebe

MDMD said:

Ignoring the contractual matter over whether they should retain the funds, by law they are required to protect the money they are holding.

You should be protected but check how they are covered.

https://www.gov.uk/client-money-protection-scheme-property-agents

This is very interesting. The agent's website says they are protected by one scheme, but when I put their name into the scheme search engine it doesn't show up.  Something to follow up on.

ArbitraryRandom

Eebe said:

I had already asked them for the deposit so I could lodge it with the protection scheme in order to save the £84 fee they will charge us but they have refused as we are on a fully managed service.

Yes, generally you can't pick and choose what you want them to do vs what you want to pay them for - their profit/price is based on the whole service (and these fees should have been available for you before you signed up). 

What if the Agent goes bust? (As MDMD has explained,) agents are required to keep rental income/similar in a ring fenced client account separate from their normal business accounts specifically to cover that contingency. 

While you're currently speculating that the monies will be withheld, from my perspective, I would expect you to receive at least 6 months of the cash (up until the break clause, minus their fees), and they have not yet said that you will not - but I could also see (as a managed service) they retain a portion to cover maintenance issues (you should check your management agreement on that point).

If they do not - are they part of a regulatory body (TPO, NAEA, NALS)? If so, you could contact them to complain this was not part of your agreement if you get nowhere directly. 

Edit: Note to self, read whole thread before responding... 

Wyndham

Eebe said:

I think they were just desperate to get the property for health reasons which is why they offered to pay up front. 

And now I'm very keen to get hold of that rent on mum's behalf rather than the agent benefitting from it.

I still think you need to do some due diligence here - you 'think' rather than know. I may be cynical, but it all sounds a bit suspicious. Just because they are older doesn't mean that they are not doing something they shouldn't be. I may be wrong, and I hope I am, but I'm seeing red flags here.

Your agent also isn't sounding great. You're paying for a service, and like any other service, that gives you rights to ask for a certain level of professionalism. I just think you need to ask a few more questions, and you are quite within your rights to do that.

sourpuss2021

Offering 6 or 12 months rent upfront is very common in today’s rental market, and the vast majority of people doing so are not cannabis growers or other such crooks!

ArbitraryRandom

sourpuss2021 said:

Offering 6 or 12 months rent upfront is very common in today’s rental market, and the vast majority of people doing so are not cannabis growers or other such crooks!

Of course, but unfortunately there are always people who have done it in the hopes it means the landlord will forget about them (aka not carry out regular inspections) - and even with a fully managed service the OP needs to be aware of the risks and not just assume the agent is doing everything needed/correctly.

Requiring regular inspections does not mean you think the tenant is doing something wrong - they mean you're behaving as a professional landlord.

As has already been mentioned, even with an agent, the landlord is responsible for the tenancy - so if they do something wrong or don't do something (like checks) then there's limited recourse for the landlord.  

Keep_pedalling

How long will it before her cash runs out to pay her care fees? Unless you have 2 years plus, renting out her property is risky as you can’t sell with vacant possession until they are out, which could be a long time if things go pear shaped and you have to evict them. There was a recent thread where someone in exactly your situation got a tenant from hell who had to be evicted through the courts at great expense. 

tightauldgit

Eebe said:

propertyrental said:

You are the landlord(s). You decide which tenants to accept. You decide whether to require 12 months rent up front ad/or a guarantor. You decide who holds that money.

Hopefully it's all specified in your contract with the agent. If it isn't, why not?

Post 9: Letting agents: how should a landlord select or sack?

Some tenants offer to pay upfront to keep the LL/agent at arms length thereafter eg running a brothel, cannabis farm or other dodgy enterprise....

what do you know about the tenants?

It felt very much like the letting agent decided all this - I guess because it's all new to us! However their contract was quite clear that the responsibility for choosing the tenant was down to us. 

The tenants are older and need a bungalow. Their previous arrangement fell through just as we were thinking about renting it so the agents mentioned us to them, and as there aren't many bungalows they were desperate to take it. I think that's why they offered to pay a year up front because they want to be there for the long term. We may have to sell before a year is up so didn't want to commit to a full year, hence the break clause after 6 months.  My sister has met the tenants a couple of times and they have exchanged phone numbers (she lives nearby) but she is keen to keep them at arms length as we are paying the agents for a full managed service.

With regard to the contract with the agent, I went through it in detail with them. There were some things I didn't like but they insisted they wouldn't change anything as it is a standard contract.  We'll see how it goes.  They haven't been great so far apart from finding a tenant before the property was even available so I guess we can't complain too much yet.

If you feel you may HAVE to sell after 6 months then have you considered what would happen if they refuse to move out after 6 months? Or if they leave it in a state that means you have to do loads of work to make it sellable?

I'm not sure I would be bothered with the risks of renting out my house if I was reasonably sure it would only be for 6 months. There's just so much that could go wrong.  

turnitround

This couple are elderly, in poor health and desperate for a bungalow and want a long term let. Yet they are now settled in a home that may need to be sold within the 12 months. Not very fair to them and not easy for you when it comes to wanting them to leave and they are struggling to find somewhere else. 

 They probably paid 12 months upfront as they are of pension age and so had no income from paid work to support them.

GDB2222

Eebe said:

I'm sure the agent won't want to pass across the rent, but I really want to know if I can insist on it?

I had already asked them for the deposit so I could lodge it with the protection scheme in order to save the £84 fee they will charge us but they have refused as we are on a fully managed service.

This is ridiculous. You are responsible for all this. If, for instance, the agent steals the year’s rent and the deposit, you will be responsible for returning anything due to the tenant out of your own pocket. I would not let the agent hang onto any of this long term. 

Them refusing to hand it over rings alarm bells with me. Personally, I would be looking at the contract to see how I could extricate myself from their grasp. I would regretfully have to disappoint the new tenants.