Contract or deposit first?

Contract or deposit first?

15:19 PM, 1st February 2022, About 2 years ago 8

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For those of you that manage your own properties (without using an agency etc), what is your sequence of events when you have a person(s) interested in taking a room or a property?

I ask this because I am having an abnormal amount of people saying that want to take a property and asking for a tenancy contract, only to then have a miraculous change of circumstances, meaning they no longer want it.

I assume that having an agreement is useful to them in some form or other (identification, benefits .. who knows !).

This isn’t a massive problem, but it’s becoming quite annoying. How is it best avoided?

I’ve never really felt comfortable asking for any money upfront before a contract, but I’m beginning to think I have to/should.

Any advice or words of wisdom will be appreciated.


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Graham Bowcock

8:20 AM, 2nd February 2022, About 2 years ago

By contract, I assume you mean the tenancy agreement. It's always good to let a tenant have one prior to signing so they have time to read.

You can legally take a holding deposit.

You could maybe whittle down your list of prospects so you're only talking to the more serious ones. We are getting dozens of enquiries for each property at the moment, so we do a pre-vetting to make sure we invest time into those who will be able to see it through.

If you have a draft AST on the computer, then emailing it out shouldn't be too much of a drain if you're pre-vetted.

Chris Bradley

8:21 AM, 2nd February 2022, About 2 years ago

I offer a draft uncompleted contract for them to look at, but then ask for the deposit on signing the contract. It's not a holding deposit which is capped, it's the full 4-5weeks rent amount deposited.

Obviously if they cancel before they move in this would be refundable, unless I wrote into the contract that the equivalent to one week's rent is a holding deposit which would mean I could keep that.

There are a lot of upfront costs for the landlord including cost of credit checks, so it's about meeting the prospective tenants and deciding who you want to have a long term relationship with, and hopefully they want to commit to the property first

Gunga Din

9:33 AM, 2nd February 2022, About 2 years ago

"I’ve never really felt comfortable asking for any money upfront before a contract, but I’m beginning to think I have to/should."

At very least, you should have taken the first month's rent and the deposit before completing the tenancy agreement. Signatures and date of signing are the last details to go on, and these should not happen until £ has changed hands.

I agree that anyone asking for a completed agreement and not going through with it is probably up to no good as you suggest, and that sending a draft copy beforehand is all they can reasonably request.

Reluctant Landlord

9:53 AM, 2nd February 2022, About 2 years ago

I send a draft contract out once they have passed the vetting stage so they know what will be expected. The draft will have the provisional dates which have been already agreed and I point this out to them when it is sent. They are then clear that the contract and tenancy will commence AFTER the deposit and first months rent is actually CLEARED. If there is a delay with this payment of there has to be a shift in dates for whatever reason, then this can be easily changed on the draft. Once the Deposit and month in advance is paid then the actual contract is fully printed off and signed by both parties. For me this normally happens on key handover/move in day itself at the same time the inventory is done and signed too. Just make sure you send the EPC, Elec cert/gas certs and How to rent booklet to them at the same time as the draft contact AND make sure they acknowledge receipt too. This way you have served all the legal stuff BEFORE they sign the actual contract on the day. That way you dont get into the problem of not doing this before the contract is actually signed.

Reluctant Landlord

10:06 AM, 2nd February 2022, About 2 years ago

I forgot to add that a lot of the time benefit claimants say they need a contract before they can start a claim at a new address - at the same time you need confirmation they can afford the rent before you issue a contract. (more important where they are claiming for the first time and not just changing addresses). In this case it is up to the TENANT to get this detail so you can make an assessment as to if they are viable to afford the property. I send the tenant a letter/email stating you may intend to rent to them but they need to match the viability criteria first so I give them all the details like address of the property, cost of rent, what the property is (house flat etc) etc. They need to sort this out with the DWP themselves. They then need to show evidence to you from the DWP of what they will get for the UC rent element. I have had cases where the UC have said they wont do this without a contract/TA first - I tell both UC the tenant there is no way this is going to happen! I put it back to the tenant to prove they can afford the full rent and if they can't move on to someone who will put in the work to get that info to you. If they can't be bothered to do the basics to show they can afford a property from the outset, then I don't want them as a tenant full stop!

Gunga Din

10:14 AM, 2nd February 2022, About 2 years ago

"they wont do this without a contract/TA first - I tell both UC the tenant there is no way this is going to happen"

Likewise. Its an unfortunate catch 22 built into the system. Walk away.

Darren Peters

10:01 AM, 3rd February 2022, About 2 years ago

Perhaps write up an AST with all the correct details but the word DRAFT across it in bold red diagonally across every page.

Reluctant Landlord

10:18 AM, 3rd February 2022, About 2 years ago

Reply to the comment left by Gunga Din at 02/02/2022 - 10:14
made worse by the fact you can't charge a bigger deposit to further reduce the risk in the first place....

Does everyone walk away in this scenario or do other LL's have a way around this or are there any local councils that have come up with ways to be more obliging to LL's to take on such tenants? Just curious!

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