Guarantee for natural void periods?

by Readers Question

17:53 PM, 19th August 2013
About 5 years ago

Guarantee for natural void periods?

Make Text Bigger
Guarantee for natural void periods?

I’m sure I’ve heard a radio advert recently from a letting agent that was offering a type of rent guarantee, not sure if was insurance backed or not. And I can’t remember the name of the agent, so I can’t check on their website. Guarantee for natural void periods

Has anyone come across this? I’m sure it said that even if the property was vacant (I assumed it to be mean ‘between tenants’ not just in a fire/flood/deserter situation) you’d still be paid your rent.

Does this exist in the market?

Thanks

Kirsty McGregor



Comments

Mark Alexander

18:04 PM, 19th August 2013
About 5 years ago

Hi Kirsty

Yes, this does exist and the chances are that the advert you heard was for Northwoods letting agency. There are several others operating guaranteed rent schemes though.

Before you just sign on the dotted, do think to yourself how they are doing it and whether it's worth it to you. To do this ask a few other letting agents to provide you with a Rightmove Plus comparables report, most good agents will do this free of charge. That way you will be able to work out roughly what percentage of your rent you are losing in favour of the guarantee and whether it is worth it to you.

They also offer a no fees service, effectively because their profit comes out of the difference between what they pay you and what they collect in rent. So far as I know, the Northwoods service is not insurance backed, neither is it backed by Northwoods. Each franchisee underwrites their own arrangements, therefore, the guarantee is only as good as the person or franchise company offering it. I am happy to be corrected on that though if something has recently changed.

Do also bear in mind that you have very little if any say as to who they let the property to. On that basis you need to consider the prospects for wear and tear, damages which may exceed the deposit paid and whether those damages are recoverable given that you don't usually have any details of the tenant. What if they put an overseas visitor with 6 kids into your property for example?

It looks very attractive on the surface and for some landlords it does provide peace of mind, hence their business is doing very well.

Do shop around though, a very helpful and competitively priced business you might wish to consider is Letting Supermarket. I reviewed their full management service on a no names basis here >>> http://www.property118.com/full-property-management-from-just-14-99-a-month/34413/

I know for sure they will be happy to produce a free Rightmove plus comparables report and talk to you about their full management package with includes rent guarantee insurance for just £35 pcm - nothing up front from the landlord and no termination clauses.

Good luck 🙂
.

Kirsty McGregor

18:12 PM, 19th August 2013
About 5 years ago

Reply to the comment left by "Mark Alexander" at "19/08/2013 - 18:04":

Northwoods - that was it! Thanks Mark, very useful info!

David Sweeney

19:09 PM, 19th August 2013
About 5 years ago

Guaranteed Rent Schemes - my opinion

In the majority of cases your tenant will be the company/organisation guaranteeing the rent, not the actual occupier. The following assumes that to be the situation here:

Such an arrangement will not / can not be an assured shorthold tenancy and when things go belly-up, the free advice on the web is about ASTs (which form the majority of residential tenancies) so you are going to either have to pay for specialist advice OR attempt to sort it out yourself - time for a review of your knowledge of tenancy law.

Most mortgages on rental properties require the tenant to be on an AST - check yours.

The contract you sign (tenancy agreement) will be provided by the company. I can think of no situation where a residential landlord would accept a tenancy agreement proffered by a tenant!

That agreement was written to protect the company, it was not written to protect the landlord.

Frequent complaints about these deals focus on the on-going repair obligations of the landlord - landlords considering such a deal should familiarise themselves with their obligations.

An equally common complaint regards the condition of the property at the end of the tenancy - the company is not going to spend thousands on their repair obligations if they can get away with a bodge. Make sure you know what the company are offering, and more importantly, what they are not guaranteeing.

Make sure you know how the agreement will end. If it is for a fixed term, will you be given vacant possession at the end of the tenancy, or will you be left with their tenant in situ - possibly an undesirable with an evaporated rent guarantee.

Ultimately it boils down to knowing what you are getting involved with - genuinely knowing, not "thinking". The only way to do this is to read it from start to finish and, if you are anything other than competent in contracts, ask a specialist solicitor to read it for you and highlight your risks.

Kirsty McGregor

19:24 PM, 19th August 2013
About 5 years ago

Thanks Dave, all useful information & common sense.

Barbara Thorning

20:10 PM, 19th August 2013
About 5 years ago

When they are underwritten by the agent generally the landlord receives around 65-70% of the rent and the other 30-35% is retained and the term is usually 12 months, around here anyway. The agent could make the equivalent of a 30-35% management fee if there are no voids, but could lose heavily if the property takes a while to let out. This does tend to make them less than fussy about who they let it to. The landlord can strike lucky and have a full 12 months income, which is reassuring when there is a mortgage involved but, as Mark says, they could be exposed to heavy refurbishment costs. There are some similarities to a Company Let, who could install the perfect occupant in the property or a careless noisy nightmare and the landlord has no say in it. A couple of the Company Lets I handled started off with excellent occupants but swapped them after a few months for some who were less so.

Kirsty McGregor

20:25 PM, 19th August 2013
About 5 years ago

Thanks Tilly. 65-70% is that all? Wow, when they said 'marginally less' I didn't expect 30% less!

Barbara Thorning

20:43 PM, 19th August 2013
About 5 years ago

Reply to the comment left by "Kirsty McGregor" at "19/08/2013 - 20:25":

Hi Kirsty, I was surprised too, but can only speak for the ones near to me and it is negotiable to some point for those willing to try.
Good luck!

Vanessa Warwick

21:59 PM, 19th August 2013
About 5 years ago

The Northwood Guaranteed Rent Scheme is probably the most trusted guaranteed rent scheme in the U.K., Northwood being a national company with considerable assets that are able to give integrity to their guarantees.

The Guaranteed Rent Scheme is for a specific type of landlord who wants complete peace of mind and no hassle. There is naturally a cost associated with that. The rent is paid from Day One, there are no agent commissions, the property is returned to you in the condition it was let to Northwood, and, if the tenant needs to be evicted, Northwood cover that cost.

You can learn more about their guaranteed rent scheme by watching a series of short videos on their YouTube channel:

http://youtube.com/northwoodlettings

We also have a discussion on Property Tribes that explains the important differences between Rent 2 Rent, subletting, guaranteed rent, and rent guarantee insurance which you may find helpful:

http://www.propertytribes.com/sub-letting-rent-rent-vs-guaranteed-rent-vs-t-8437.html

Kirsty McGregor

22:03 PM, 19th August 2013
About 5 years ago

Reply to the comment left by "Vanessa Warwick" at "19/08/2013 - 21:59":

Thanks Vanessa! Very useful info 🙂

Barbara Thorning

22:10 PM, 19th August 2013
About 5 years ago

Reply to the comment left by "Kirsty McGregor" at "19/08/2013 - 22:03":

Just for clarity, I would like to confirm it wasn't Northwood I was referring to in my earlier post!

1 2 5

Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

HS2 accelerating Birmingham's potential into its grand future

The Landlords Union

Become a Member, it's FREE

Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agents

Learn More