Rent in Advance or Rent in Arrears?

Rent in Advance or Rent in Arrears?

16:01 PM, 19th May 2021, About 2 months ago 8

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Most Tenancy Agreements (TA) state first rent in advance, but what about when this is not applicable? Benefit tenants or Direct Landlord UC payments are always a month in arrears, so how do you get across this dilemma of the working in a TA?

Is it viable to ask for two months Rent in Advance from the Council (who are funding it on behalf of the tenant), so that once UC does start paying, the position is then technically a month in advance?

How do you word a specific TA when you know you will be paid in arrears, at the same time as protecting yourself from being at the mercy of a tenant who may leave before the BAP period, so you are then down the last months rent?

Many thanks

DSR



Comments

by Robert Mellors

11:37 AM, 20th May 2021, About 2 months ago

Rent would still be due in advance, whether tenant pays in advance or not and regardless of whether they are claiming UC or not, so there is no change to the wording of the AST.

If the Council are paying the Rent In Advance, they will have their own rules about how much they are willing to fund, but I imagine it will be limited to one month's rent. In some high demand areas, some councils offer "incentive payments", in addition to RIA, Deposit/Bond, etc, so you should check whether this is applicable in your area.

UC is part of the DWP, it is nothing to do with the Council so do not confuse it with the previous Housing Benefit regime, it works quite differently. UC (Housing Element) is paid direct to the tenant, with a few exceptions, so be aware that if the tenant does not pass this on to you, it may be very difficult to get UC to make payments direct to you.

You cannot protect yourself from a tenant leaving before the BAP period and thus them getting the final UCHE payment, instead it may go to the new landlord. You have no recourse or remedy against this happening. The only recourse you have (once the tenant has moved out) is debt collection from the tenant or their guarantors.

by Seething Landlord

11:47 AM, 20th May 2021, About 2 months ago

On the few occasions that we have let to benefit claimants we have made it clear that it remains their responsibility to ensure that the deposit and rent are paid in full and on time i.e. in advance. How they fund the deposit and first month's rent is up to them, but we have found that they have been able to meet the requirement with no apparent difficulty. If they can't, find a tenant who can.
Maybe you are in a particularly difficult situation but surely you need to have confidence that a prospective tenant is willing and able to pay the rent in accordance with the agreement before offering a tenancy?

by Mike in Worthing

14:12 PM, 20th May 2021, About 2 months ago

You can demand up to 2 months rent in advance. Anything over this may be deemed a premium and you risk falling foul of section 15 of the Housing Act 1988.
The tenant could then assign the tenancy to somebody else against your wishes. Not a good idea if she/he were an even worse credit risk.
Rent in the TA should ALWAYS be stated as payable in advance, regardless of the tenant's circumstances. If this is unclear, common law prevails (Rent only payable in arrears).
One way of mitigating risk of UC claimants is to have an advance rent auction. The applicant who bids the highest - other factors being equal - is successful.
Always KYC (know your customer). On the few occasions my tenancies have gone wrong it's always been because I didn't KMC as well as I should have done.

by David Price

15:00 PM, 20th May 2021, About 2 months ago

Reply to the comment left by Mike in Worthing at 20/05/2021 - 14:12
An advance rent auction is a nice concept which I will try. It has the benefit of weeding out most chancers before they even think of approaching a prospective landlord.

by Landlord Phil

11:35 AM, 22nd May 2021, About 2 months ago

Put simply, you don't. You set your standard, if your prospective tenants can't comply, they don't get a tenancy. Simple really. It's your choice. Benefits or not, it's your rules, that's it.

by Judith Wordsworth

1:04 AM, 23rd May 2021, About 2 months ago

Most Local Authorities pay rent 4 weeks in arrears, not 1 month in arrears. I vary the AST to reflect this eg rent is payable unless all or a portion of the rent is payable by the Local Council and that portion is payable 4 weeks in arrears any amount not covered by the housing benefit is paid 1 month in advance.
Makes the rental payment spreadsheet interesting reading lol.
Once they vacate the property the housing benefit comes 4 weeks later.
Make sure that the tenants sign the housing benefit document that the housing benefit is paid direct to you and not to the tenants.

by Landlord Phil

11:09 AM, 23rd May 2021, About 2 months ago

You're much more flexible than I am. But then again, I don't know your situation. I personally always get enough applicants to be able to choose who I take. There's no way I would vary my terms. I'd rather sell up than increase my risk factor. I didn't get into property to be charitable. I need an income.

by Ian Narbeth

10:03 AM, 26th May 2021, About 2 months ago

Reply to the comment left by Mike in Worthing at 20/05/2021 - 14:12Mike
I think you are mistaken re s15 of the Housing Act. It relates to a Landlord's ability to object to an assignment of the tenancy. The law is not straightforward.
If the lease is silent on the tenant's ability to assign then in certain cases, s15 implies a term that the tenant cannot assign or sublet without the Landlord's consent.
That provision is negatived if the Landlord takes a premium exceeding two months' rent. Not taking a premium allows a landlord to withhold consent to assignments, without being challenged as to reasonableness. So if the Landlord does take a premium, this will limit his ability to prevent the tenant assigning.
Premium is defined to include "any sum paid by way of deposit, other than one which does not exceed one-sixth of the annual rent payable under the tenancy immediately after the grant or renewal in question." Deposits are, by the Tenant Fees Act 2019, now limited to five or six weeks rent in any event.
However, s15 does not apply in the case of a periodic tenancy which is not a statutory periodic tenancy (e.g. a contractual periodic tenancy) if (per s15(3)(a) "there is a provision (whether contained in the tenancy or not) under which the tenant is prohibited (whether absolutely or conditionally) from assigning or sub-letting or parting with possession or is permitted (whether absolutely or conditionally) to assign, sub-let or part with possession".

In other words for most well-drawn ASTs (those that do NOT create statutory periodic tenancies) s15(1) will not apply because there will be express provisions relating to assignment and subletting.
The law does not prohibit a tenant paying more than two months rent in advance.


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