Should I proceed with offering a tenancy agreement?

Should I proceed with offering a tenancy agreement?

9:29 AM, 23rd July 2021, About 3 months ago 46

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Hi Folks, Some sage advice please:- I’ve just referenced two lovely prospective tenants who have failed the comprehensive referencing.

They’re both clear of debt and have no CCJ’s,  there are good previous Landlord’s references and generally all-around decent reports. Both are considered “Medium Risk” according to the reports.

One prospective tenant is currently in receipt of Universal Credit, but anticipates returning to work as a self-employed chef (cooks for private dining) shortly and the other is in full-time employment.

According to the Rent Affordability Calculator, their combined incomes are just about sufficient to cover the monthly rent. Everything else on the reference reports are fine, but the referencing company has suggested that I proceed with a guarantor, which the candidates are unable to provide.

The candidates are offering to pay for a year’s rent in advance.

As I intend to purchase Rent Guarantee Insurance and as a condition of obtaining this, the candidates must pass the referencing, I’m apprehensive in offering them a tenancy.

Any suggestions would be gratefully received.

Thanks in advance!

Mark



Comments

by jimhaliburton

7:52 AM, 24th July 2021, About 3 months ago

Legally I do not think you can take a years rent in advance unless your AST states your rent must be paid yearly. It is I believe something to do with the tenancy deposit legislation which says you cannot take rent in advance unless you protect it under the TDS.

In other words once you take a years rent in advance the next rent must be yearly in advance.

Best check this out with a legal expert

by Shirley Harvey

10:24 AM, 24th July 2021, About 3 months ago

Reply to the comment left by at 23/07/2021 - 13:46
Yes Helen, we did consider ourselves 'lucky'. We had fabulous tenants who stayed for 2 years, kept our property immaculate and we had no issues with rent payments. I know it shouldn't be this way, but we all know some of the 'horror' stories others have shared with us!

by The Property Man

10:31 AM, 24th July 2021, About 3 months ago

Reply to the comment left by Clint at 23/07/2021 - 14:03What happens if they don’t pay after 12 months when the rent runs out ?
I have had lovely tenants who I have given a chance to and they have payed upfront for a year, then stopped paying when the rent runs out.
Most tenants are lovely tenants when they are desperate to move into your property.
Landlords who have been through this situation already are probably the hesitant ones offering their opinion and advice.

by Clint

10:59 AM, 24th July 2021, About 3 months ago

Reply to the comment left by The Property Man at 24/07/2021 - 10:31
Basically, in your tenancy you state that rent is payable 3 or 6 months in advance on a monthly basis so after 3 or 6 months have passed, they pay you run each month so that, they are always 3 or 6 months in advance or however months you put in as being in advance in the tenancy agreement. They may or may not agree to this in which case one can decide to take them or not.

After the period of 3, 6 or any other months have passed if they don't pay the monthly rent in advance, you can start eviction proceedings.

I have many very high risk tenants on UC without guarantors that pay deposit and one month rent in advance and all these have failed the referencing affordability test. Most problems in them getting into arrears is due to UC and not the tenant. I have many of such high risk tenants that have been renting from me for years now with no problems.

Ever since the pandemic started, I insist on guarantors due to the length of time it takes to evict a tenant but this is with them paying a rent of one month's rent in advance.

by Clint

10:59 AM, 24th July 2021, About 3 months ago

Basically, in your tenancy agreement you state that rent is payable 3 or 6 months in advance on a monthly basis so after 3 or 6 months have passed, they pay you rent each month so that, they are always 3 or 6 months in advance or however many months you put in as being in advance in the tenancy agreement. They may or may not agree to this in which case you can decide to take them or not.
After the period of 3, 6 or any other months have passed if they don't pay the monthly rent in advance, you can start eviction proceedings.
I have many very high risk tenants on UC without guarantors that pay deposit and one month rent in advance and all these have failed the referencing affordability test. Most problems in them getting into arrears is due to UC and not the tenant. I have many of such high risk tenants that have been renting from me for years now with no problems. I tend to do the referencing more to see if they have CCJs or any debts
Ever since the pandemic started, I insist on guarantors due to the length of time it takes to evict a tenant but this is with them paying a rent of one month's rent in advance.

I guess this is all for very experienced landlords as I generally know if I will take them or not on gut feeling after interviewing them.

by Helen

12:00 PM, 24th July 2021, About 3 months ago

A point about guarantors. I know it is a layer of protection but supposing they decide not to pay either? Isn't it the same? I know they would have more to lose with potentially a mortgage and a professional job but surely it still isn't failsafe?

by Clint

12:20 PM, 24th July 2021, About 3 months ago

Reply to the comment left by at 24/07/2021 - 11:59
With a guarantor who is a home owner, one can get a charge on their property and depending on the debt, they can be forced to sell up and pay your debt or, if you are willing to wait, when the property is sold anytime in the future, you will be paid from the proceeds after the mortgage is paid of.

It was only in November last year, a guarantor that owed me £19,800 settled with an agreement of £18,000 as, I got a charge on her property.

by Jessie Jones

12:20 PM, 24th July 2021, About 3 months ago

Be very wary of taking more then a month's rent in advance. Even if your AST says that it is payable monthly, by taking it a year in advance you have created a tenancy agreement with a payment period of 1 year, irrespective of what the AST says. If they stop making any payments after 1 year, then you won't be able to commence Section 8 eviction after 1 month of arrears, but will have to wait 3 months. As someone else has suggested, it could also be interpreted as a deposit, falling outside the regulations and you would have to pay up to 3 times it's value back. Imagine taking 12 months rent, and then 30 days later having to pay 36 months rent back !
If your AST says 1 month in advance, then stick to it. A compromise might be to ask them to show you proof of such funds, without actually taking them.
I very much doubt that any insurance company would pay out under a rent guarantee policy, if the tenants have not passed referencing.
If you want to go with your gut instinct, then you need to be in a position to be able to weather the storm if it all goes wrong. If you are reliant on the income, then wait for a safer applicant.

by Clint

12:29 PM, 24th July 2021, About 3 months ago

Reply to the comment left by Jessie Jones at 24/07/2021 - 12:20
There is a ruling in the appeals court where if 6 months rent is paid in advance, it is clearly the rent being paid and cannot be treated as a deposit as it was actual rent being paid.

I am sure if one wants, they can google the case so, paying rent 6 or 12 months in advance is not a deposit however, in stating this, I am not legally trained so one should do their own investigation on this. I however, would definitely accept 12 months rent in advance as I feel certain having read the case that it is not a deposit.

by Monty Bodkin

12:29 PM, 24th July 2021, About 3 months ago

Reply to the comment left by Paul Shears at 23/07/2021 - 22:55I don't know anyone who would guarantee my rent as a tenant
So that blows me out of the water as a tenant."

Why, would you fail tenant referencing as well?


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