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

GDB2222

In your first post, you said “  … renting out her property for a few months while we decide when to sell it (will be needed to fund her care home). “

That worried a lot of posters, because it is hard to get rental properties back after a few months. 

Now, you are saying the tenants can stay as long as they like, provided they are good tenants (which they may well be). It’s all a bit confusing.

Are you sure the LA will pay the fees for the home whilst you rent the bungalow out, more or less indefinitely? That seems too good to be true.

bunnygo

OK - what's done is done. Now to secure the situation.

agents vary and national ones aren't necessarily any better, it depends on the branch. You need to check that everything necessary has been done - off the top of my head this includes how to rent guide, EPC, deposit protection and supply of prescribed information, smoke alarm test, CO alarm test, electrical safety certificate, gas safe cert if applicable. You also need evidence that the tenants have been provided with all this as failure to do so invalidates a section 21.

you also need full insurance, rent guarantee cover, legal expenses cover, malicious damage cover. Tax return to be done each year. I'd be very surprised if the rental you get is worth it but I'm afraid you are now committed.

you need a lasting power of attorney set up for your mum in case she becomes incapacitated. These take 20 weeks to set up so get this moving if it isn't already there.

I'm sorry to be so brutal but you now need to protect your mum from possible consequences.

CKhalvashi

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 not exactly the case though.

In a worst case scenario a 6 month break clause will lead to a S21, that will lead to court action and that will lead to an eventual eviction. Only the tenant or a court can end the tenancy, not OP or the agent.

The money in a worst case scenario should be held in a client account by the agent.

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.

Everything is down to you though, not the agent. Agents can recommend but not dictate and in general a fully managed service will cause just as much work for you as a rent collection only service, possibly bar you having to know/find tradespeople. You will still need to check that everything has been done.

If there's a term in a contract that I don't like, it's renegotiated. Nothing is set in stone, nothing is a standard contract. If you don't like contractual clauses you renegotiate them or find someone who will offer something acceptable. This is a Business to Business contract (being a landlord is a business as it's run explicitly for financial gain).

Equally you are fully liable for ensuring the protection of the deposit and the agent has no right to insist you can't, however.if you've signed a contract stating you need to pay £84 whether they do this or not, you will need to pay this. As above, this is a B2B contract with no consumer rights.

I'm not a property agent (although do have a business interest that provides some services to such businesses), but as a business group we use standard contracts as a starting point but everything that is worked through is bespoke to each client.

Is this by any chance a national chain? From experience you really don't want to deal with most of them.

CKhalvashi

Eebe said:

Oh my goodness.  Thanks so much for all your comments.  It has been quite eye-opening as you're all saying how we are responsible for everything whereas we thought employing an agent would be a good idea as they would look after it all for us (and charge accordingly).

To answer the various questions - Mum is the landlord on the terms of business with the agent (who is a national estate agent), so I assume will also be on the TA.

The situation was explained to the tenants up front so they are fully aware. We certainly aren't being cruel to them.  They were desperate to move in and my sister worked really hard clearing the house so that they could do it before Easter.  I'll be annoyed with the agent if accepting the rent means we're obliged to keep them for a year as we specifically wanted the option to end it after 6 months in case they are nightmare tenants.  However, I very much hope that the rental is a success in which case they can stay for as long as they want.

Mum has got between 1 and 2 years cash before we need to sell the house but her council offers the option of paying the fees until the house is sold so we're hoping she will qualify for that if necessary.

There are many good agents, these tend to be the smaller ones who offer a much more personal service than the big chains (but there are many people working for those too). I have friends in the industry, mainly in independent firms, who work really hard for the money.

On your specific question regarding the 6 months, you will need to check the agreement carefully, remembering as above that you can't end the agreement, only the tenant or a court can in law.

Read everything that Bunnygo has said 2 posts above this one and make sure you have everything. That post is not brutal, it's honest and it's the reality of the situation you've entered into.

ArbitraryRandom

CKhalvashi said:

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 not exactly the case though.

In a worst case scenario a 6 month break clause will lead to a S21, that will lead to court action and that will lead to an eventual eviction. Only the tenant or a court can end the tenancy, not OP or the agent.

I'm guessing my post wasn't clear.

I was pointing out the break clause the OP wanted in the contract can also be used by the tenant (so if they get the 12 months rent they need to be prepared/able to pay half of it back in a 'reasonable' time period and be aware that there might be a void where fees might be payable but the property is generating no income) - no S21 or court in that situation. 

CKhalvashi

ArbitraryRandom said:

CKhalvashi said:

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 not exactly the case though.

In a worst case scenario a 6 month break clause will lead to a S21, that will lead to court action and that will lead to an eventual eviction. Only the tenant or a court can end the tenancy, not OP or the agent.

I'm guessing my post wasn't clear.

I was pointing out the break clause the OP wanted in the contract can also be used by the tenant (so if they get the 12 months rent they need to be prepared/able to pay half of it back in a 'reasonable' time period and be aware that there might be a void where fees might be payable but the property is generating no income) - no S21 or court in that situation. 

Yes. Sorry if I wasn't clear too, I was referring specifically to the OP wanting to exercise it and the tenant not.

We have, however, given both sides of this perfectly, which probably is what the OP needs right now.

Eebe

GDB2222 said:

In your first post, you said “  … renting out her property for a few months while we decide when to sell it (will be needed to fund her care home). “

That worried a lot of posters, because it is hard to get rental properties back after a few months. 

Now, you are saying the tenants can stay as long as they like, provided they are good tenants (which they may well be). It’s all a bit confusing.

Are you sure the LA will pay the fees for the home whilst you rent the bungalow out, more or less indefinitely? That seems too good to be true.

So the initial plan was to rent the property for 6 months and then maybe put it up for sale. That would take a few months to go through by which time the tenant's contract would be up.  I'm doing this with my sister and the decisions are mainly hers because she is the one who lives near Mum and has had to deal with the house over the last 10 years. Personally I would prefer to rent it out as long as Mum is alive but if there are problems with the tenants or the house over the next few months my sister will want to get rid of it as she is the one lumbered with all the work of looking after it.

The LA do offer the option of paying the fees and taking a legal charge over the property plus charging interest (bit like equity release). They are not allowed to make a loss on the arrangement which is fair enough. It doesn't say that you can't rent out the property at the same time but if that is an issue then we won't extend the tenant's contract beyond the first year.

Eebe

bunnygo said:

OK - what's done is done. Now to secure the situation.

agents vary and national ones aren't necessarily any better, it depends on the branch. You need to check that everything necessary has been done - off the top of my head this includes how to rent guide, EPC, deposit protection and supply of prescribed information, smoke alarm test, CO alarm test, electrical safety certificate, gas safe cert if applicable. You also need evidence that the tenants have been provided with all this as failure to do so invalidates a section 21.

you also need full insurance, rent guarantee cover, legal expenses cover, malicious damage cover. Tax return to be done each year. I'd be very surprised if the rental you get is worth it but I'm afraid you are now committed.

you need a lasting power of attorney set up for your mum in case she becomes incapacitated. These take 20 weeks to set up so get this moving if it isn't already there.

I'm sorry to be so brutal but you now need to protect your mum from possible consequences.

Most of the things you've listed have definitely been done as they were mentioned in our agreement. I'm still waiting for the tenant's agreement and will then check they've had all this. The agent told us we couldn't get rent guarantee cover as the rent was paid up front and as they are annual contracts it seems to me I don't need it for this year. I have the other insurance.  I can do a tax return easily enough although I'd agree it's a pain to do. Already have to do my own. Already have LPA for Mum.

macman

Eebe said:

GDB2222 said:

In your first post, you said “  … renting out her property for a few months while we decide when to sell it (will be needed to fund her care home). “

That worried a lot of posters, because it is hard to get rental properties back after a few months. 

Now, you are saying the tenants can stay as long as they like, provided they are good tenants (which they may well be). It’s all a bit confusing.

Are you sure the LA will pay the fees for the home whilst you rent the bungalow out, more or less indefinitely? That seems too good to be true.

So the initial plan was to rent the property for 6 months and then maybe put it up for sale. That would take a few months to go through by which time the tenant's contract would be up.  I'm doing this with my sister and the decisions are mainly hers because she is the one who lives near Mum and has had to deal with the house over the last 10 years. Personally I would prefer to rent it out as long as Mum is alive but if there are problems with the tenants or the house over the next few months my sister will want to get rid of it as she is the one lumbered with all the work of looking after it.

The LA do offer the option of paying the fees and taking a legal charge over the property plus charging interest (bit like equity release). They are not allowed to make a loss on the arrangement which is fair enough. It doesn't say that you can't rent out the property at the same time but if that is an issue then we won't extend the tenant's contract beyond the first year.

You clearly don't understand basic tenancy law, which concerns me in these circumstances. The tenancy does not end at the end of the 6 or 12m minimum term. Unless the tenant voluntarily ends it, or you mutually agree a new contractual term, it simply continues as a periodic tenancy until either the tenant or a court end it. Your mum, the LL, cannot end it.
Regarding responsibility, she, as the LL, is 100% responsible for all the many statutory and regulatory requirement (GSC, EICR, deposit protection, right to rent check, How to Rent booklet, etc): delegating these tasks to an agent does not absolve the LL of legal liability should they not be done. It simply means that you can counter-sue the agent if they fail to carry them out as required.
Putting a charge on the property until sale can be a good option ,and one that relieves you of any immediate financial concerns or necessity ro let it, but that ship has already sailed..

Eebe

You’re right - I didn’t know. So thanks for spelling it out. I’m happy to learn all about it. It’s quite interesting.