“Rent 2 Rent” strategy under the microscope

Hi Anon. Re deposits we register all ours in the usual way with DPS. They are registered with our account and we are responsible for them. We don’t bother the primary LL with minor repairs say yo to £100 (we charge tenants for any damage – only happened once this year) so things like boiler repair, the primary LL would be responsible as per the normal LL/tenant relationship. The primary LL is also responsible for gas certs and we also make sure they are up to date. With regard to EPC the primary LL has to issue one to us but we are not obliged to issue one to our tenants. This was covered in a recent article by NLA – but I can’t locate it at the moment :-/

Hi Mary. Saw Jim at BPM on Monday. He is the speaker at their next event. 🙂

Hi Mark.
Longer leases with a favourable break clause is a great idea to help further negotiate the rent down with the primary LL. I keep the initially lease fairly short in case there is a unforeseen problem with the property. If it is a good property I extend the lease 6 months into the 12 month contract. This gives me a second opportunity to negotiate with the LL to make some more improvements.
Can you expand on what a Premium Tenancy is?
There are a lot of foreign nationals wanting to relocate on short term contracts often of 1 or 2 months and I would agree that it would seem that a licence is the way forward with this, but I have not been able as of yet to get a conclusive answer.
Your point 1. We are careful not to spend money on the refurbs – the lowest was £325, highest was £2k (this property generates £917 pcm so its stacks up)
Most of our properties thus have so far come via an agent who will have done the relevant landlord checks, but you raise a good point about ownership and its worth the few pounds to check actual ownership at the land registry.
Your point 2. We find the best properties are tired looking student properties. There are new student halls being built all over the place = the older properties remain empty, which will cause pain for the landlord. These properties are easy to spot – curtains always drawn, overfull bins, recycling bins full of wine bottles and beer cans (OK, its a sweeping generalisation!)
But yea we have specific scripts, process’s and systems we now follow plus a direct to LL ’17 reasons why you should rent to us’ document and recently we have been able to show LL’s how they can earn more renting to us rather than agents over the course of a year even when we pay them £200 less pcm!

Pretty much everything you might want to know about Premium Tenancies can be found in this VERY long thread >>>
https://www.property118.com/index.php/premium-tenancies/24130/

We have a line in our contract that asks for a warranty that the primary LL is on the correct product. I have always taken a pragmatic approach to life. How often are properties repossessed for being on the wrong product? If lenders discovered the LL was not being truthful, they would probably insist that they switched to the correct product. Of course this would involve a bigger deposit. If the LL could not afford it, this may present itself as an opportunity for a good BMV deal. There are so many LL’s in Britain on the wrong mortgage products that there was a tenant protection act introduced in 2010. That said many of our LL’s are older gentlemen with unencumbered properties.

I thought “50 shades of grey” was a book referring to the colour of an average LL’s hair after one year in the business?! :-))

We generally sign a 12 month contract initially but will check this one out, thank you. I think you hit the nail on the head. Most lenders are happy as long as the mortgage is being paid.

There is as always legislation to consider including the Eviction Acts, Housing Acts, Tenants Protection Acts and Notice Procedures etc. God bless red tape, where would we all be without its protection?

All the recent discussions have led me to re-evaluate our procedures to make sure we are doing things correctly.

To use an AST there are certain criteria stipulated by the Housing Act 1988. Namely:

1.The tenant must be an individual and
2.The property must be occupied as the tenant’s only or principal home.

If you are leasing in the name of a company, as we are, then it cannot be an Assured Shorthold Tenancy.

The use of a Management Agreement Lease by far appears to match what we are effectively
providing to the Landlord – which is a lettings management service. We are obliged to pay rent in void periods and this must drafted into the lease.

The Management Agreement must deal with things like the Landlord providing you with a warranty that they have received consent to let from their mortgagees. It would also provide you with authority to act on behalf of the Landlord and deal with all tenants. As for insurance the end tenant’s names must be included on the primary landlord’s policy. This is simple enough to arrange.

The use of a licence. It doesn’t matter what a document calls itself – the courts will look at the reality of the situation to distinguish whether a tenancy is on a lease or a licence. If you are granting the occupiers exclusive possession of the dwelling at a market rent then this will inevitably equate to a lease and be covered by the HA1988, making it an assured shorthold tenancy agreement.

If you use a Management Agreement Lease then the best approach would be to have an AST in place between the primary Landlord and the Tenant. You would set up the AST and sign as agent for and on behalf of the primary Landlord, ensuring that you retain the management function

So my conclusion is that the most advantageous approach would be to have a Management Agreement between you and the primary Landlord. You would pay the primary Landlord a fee for the consideration of collecting and retaining whatever rent is paid under the contract. The end tenant would have a direct Assured Shorthold Tenancy Agreement between the primary landlord and the end tenant. You would have agency powers, to be covered in the Management Agreement, to sign the agreements on the landlord’s behalf.

This is pretty much what I have been doing and will continue to do. Of course there will be those who disagree and they are welcome to their own opinions

I have always found that you insist on perfect clarity before you do anything, you will never do anything. Some of the comments made on the Facebook threads are obviously made by people with minds like knitting that the cat has played with! They are finding fault like there is a reward for it! I like 118 much better because people post with answers not further fault finding. Thanks all for your input 🙂

Re short stay tenants – I understood that if you have a short
stay tenant ie a month or two, and they have exclusive possession for a limited
period, it would be akin to a common law tenancy but they would have to confirm
that the dwelling was not their main residence. Any thoughts?

If they confirm the dwelling is not their main residence then my understanding is that you can let under licence, same as a holiday let.

Been doing more research Mark – To be a short term holiday let it genuinely has to equate
to a dwelling being occupied for the purpose of a holiday. It then falls out of
the HA1988. If it becomes a periodic tenancy, following the expiry of the term
then it may acquire an AST status.