I have been offered 6 months rent in advance

by Readers Question

19:47 PM, 14th April 2013
About 6 years ago

I have been offered 6 months rent in advance

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I have been offered 6 months rent in advance

I have been offered 6 months rent in advanceI have a prospective tenant who has been paid off with early retirement from a major high street bank together with a large critical illness payment for a heart condition.

She has 2 young boys, a broken marriage and a wealthy father as a guarantor. Her credit checks show her to be a very low risk.

She has offered 6 months rent in advance for a 6 month contract. I queried the letting agent about any change in her rights as a tenant if she pays more than 2 months in advance. He checked with his legal advisor and tells me there is nothing different due to an AST being in place. He also says I am within my rights to ask for a further 6 months in advance which will be requested 3.5 months into the tenancy.

The lady in question has a small pension income but a large amount of savings (which means nothing of course) however her father is guarantor with a secure income.

Apart from renting to my step-son last year followed by a refurbishment of the property, this will be my first ‘real’ tenant as such. Trying not to rush into anything but wanting to get the place let.

Would you take her on as a tenant?

Suzanne Edgecombe



Comments

Mark Alexander

19:55 PM, 14th April 2013
About 6 years ago

Hi Suzanne

Yes I would take her on as a tenant, albeit on a different basis.

Six months rent in advance opens up a massive can of worms as I am sure others will agree. First, you may well be creating a Premium Tenancy which affects rights of assignment. Second, there is a big court case running at the moment to decide whether rent in advance is a deposit. Third, you may not be able to serve 2 months notice at the end of the initial six month tenancy agreement should you need to. Therefore, I say the advice you have been given by your letting agent is wrong.

I had a very similar scenario put to me. What I agreed was that I would take a months rent up front plus two months deposit and that the guarantor would make the monthly payments. Unless you are a large portfolio landlord and can self underwrite the risks associated with non-payment of rent I would also advise you to purchase Rent Guarantee Insurance.

Finally, under the circumstances I would not trust this agent. If I were you I would agree a fee for tenant find only, get another agent to reference the tenant and the guarantor and sort out the RGI for you. Please see >>> http://www.property118.com/index.php/full-property-management-from-just-14-99-a-month/34413/

I hope that helps.

HMOLandlady

20:13 PM, 14th April 2013
About 6 years ago

Hi. My response would be to also check her out at her current address. I recently purchased a run down property from a lady with 2 children and 2 grandchildren and the place was just awful. They'd done no maintenance, all of them smoked (except the kids of course!) and were selling to go into rented accommodation.

As we were chatting she revealed that she was paying her new landlord 12 months rent UPFRONT for a new build ! We could only guess how the place was going to look at the end of that term.

On the plus side, I took on a single mum tenant with sketchy income following her harrowing divorce and she's just brilliant but we did go to her house to give it the "once over" and meet the children. 2 years on and the rent is paid on time and the house is kept beautifully.

Mark Alexander

21:06 PM, 14th April 2013
About 6 years ago

@HMOlandlady, that's great advice. As self managing landlords my family always insist on meeting prospective tenants in their current homes wherever possible. We use completion of application forms as the excuse. It's not always possible of course if they are living out of area

user_ 685

21:34 PM, 14th April 2013
About 6 years ago

Obfuscated Data

Serena

22:06 PM, 14th April 2013
About 6 years ago

Hi Suzanne. Alternatively, if your property is in the South or South East I can recommend an excellent letting agent who won't rip you off. As regards the current one, I think you'll need to read their terms and conditions and decide how you want to proceed.

user_ 685

22:16 PM, 14th April 2013
About 6 years ago

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Mark Alexander

22:19 PM, 14th April 2013
About 6 years ago

@Suzanne - typically, letting agents include Tenant Referencing in Let Only arrangements and charge the equivalent of around two weeks rent. I suspect that's what your agent will want for what they've done for you to date. It's possible to get the same service for under £100 if you shop around though. Management typically costs 6% to 15% of rent a service varies considerably. RGI generally costs around £100 for 6 to 12 months cover. I wish I had been able to advise you 6 weeks ago as your experience to date has cost you dearly. We all live and learn though and next time around you will be far better informed.

user_ 685

22:43 PM, 14th April 2013
About 6 years ago

Obfuscated Data

Mark Alexander

22:51 PM, 14th April 2013
About 6 years ago

Get your money out of your offset mortgage ASAP, I have unofficial word that drawdowns on Zbarclays and former Woolwich mortgages are being pulled. I am investigating the source of this rumour and an article will appear on Property118 later this week

23:50 PM, 14th April 2013
About 6 years ago

Simple answer is to obtain RGI on her father and just take 2 months rent as deposit and 1 month's rent in advance.
No need to check on the tenant as they will probably fail.
That's it!

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