Tenant offering to pay 6 months rent up front

Tenant offering to pay 6 months rent up front

12:03 PM, 10th January 2014, About 8 years ago 68

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We have just recently bought a property and are renting it through a letting agent.

They have possibly found us a tenant 🙂

She is currently renting in the area and wants to downsize but she wants to pay 6 months rent in advance.

My feelings are that this is not a good idea.

My husband can’t see a problem, but I am a bit dubious.  Tenant offering to pay 6 months rent up front

Can anybody help me overcome my fears on this?

Many thanks

Sue



Comments

by Romain Garcin

12:19 PM, 16th January 2014, About 8 years ago

Reply to the comment left by "Industry Observer " at "15/01/2014 - 08:57":

"The last payment in the 7 month fixed term is a one month payment – get it?"

Yes I get. That what I was also saying.
But this has nothing to do with any deposit protection issue.

"If the LL just wants to let for 6 months full stop then the rent is simply described as say “£6000 from 1.1.14 to 30.6.14″ and you serve a s21(1)(b) soon as you can with end date 30.6.14 if tenant doesn’t vacate then a periodic tenancy is automatically created but instead of being stuck with a new 6 months notice you have already served the notice to end of term."

Yes the landlord can then start proceedings without having to serve an extra long notice.
BUT, a periodic tenancy with 6 month periods is still created. Ie. the tenant is stuck with such extra long notice is he wants to leave and £6000 is again due up front as soon as the periodic tenancy is created.
A tenant agreeing to that would not know what he was doing... Ie. Not a good recommendation.

by Romain Garcin

12:32 PM, 16th January 2014, About 8 years ago

To summarise, there are 3 distinct issues:

1. Rent paid in advance must so in a way to avoid it being considered a deposit.
This can be done by adding a clause in TA that rent for the first n months is due at the beginning of the fixed term tenancy (see Johnson v. Old).

2. Clause in (1) will apply to any following statutory periodic tenancy. This is probably to be avoided. Not sure how, perhaps by stating dates as suggested by IO above.

3. Setup should also probably avoid creating a statutory periodic tenancy with very long periods. So rent must be specified as payable monthly and the fixed term must be for at least n+1 months.

Bottom line: Be careful.

by karen Haring

9:25 AM, 18th January 2014, About 8 years ago

It sounds to me that there maybe a drug farm running at you dwelling.
I would be looking at the fact...a lot of money straight away is a good indication.
please be careful.
We got caught and getting these kind of people out was a night mare...
Good luck and please go with your gut feeling...
If in doubt don't do it.

by Gary Nock

10:57 AM, 19th January 2014, About 8 years ago

Also bear in mind that banking 6 months rent up front can impact upon your tax payable for that tax year and push you into higher brackets. Particularly if it's a high cost rental. You could bank it into a "client holding account" and then transfer the monthly rent each month into your "rental account" as if it were the tenants payment. This is particularly useful if it falls over two tax years. If it all falls into the one then there is no advantage.

by Gary Nock

11:26 AM, 19th January 2014, About 8 years ago

And as regards the cannabis farm issue. Yes I agree that 6 months rent up front can be a trigger for suspicion. But as stated on this thread we should not tar every 6 month up front as a cannabis farmer. However this should then lead to the following:

1. Teaching granny to suck eggs I know but a good comprehensive reference with employer and financial plus previous landlord checks. Bear in mind though that the people who front these operations are very cute and will have alternative identities and / or will give you information that will lead you to people who have been primed to say the right things. Or they will pay a "clean skin" with no adverse reports to apply in exchange for a "small consideration"

2. If you are letting through an agent and you get the 6 month rent up front scenario then DO NOT ASSUME that the agent will have looking after your interests as high as yours. Ask to see all the paperwork. From start to finish. Look for inconsistencies such as gaps in address history, different phone numbers on different documents. If possible ask the prospective tenant if the number is a pay monthly or a pay as you go. Drug dealers always use pay as you go and change them frequently. Sometimes once a week. Ask for a landline number. If they are a dealer inevitably they will not have one.

3. Social media. We all disclose a surprising amount of stuff about ourselves in cyberspace. Yes I know a good dealer will have fake profiles but in my experience they do not go quite this far in many cases. If you check Facebook, Twitter, LinkedIn, etc and find something. Again look for inconsistencies between sites. If you find nothing ask yourself why?

4. Financial. It's a bit obvious but there is nothing wrong in asking where the money for 6 months comes from. If they earn minimum wage and they are coming up with 10K then that should ring alarm bells.

This list is not exhaustive but gives you a flavour of some of the things to consider when suspicions arises. Decision making in cases such as this should be cumulative and if the enquiries you make lead to a " that's a bit strange" several times then as attractive as the money is just walk away. I have seen the remains of several cannabis farms in my time and it's not pretty, in one case a house worth 500k had to be gutted. Walls, floors, plaster the lot and start again. The soil, water and compost used had caused floors to collapse. The landlord burst into tears when she saw it. The two Vietnamese gardeners employed by the "main man" were caught on the roof. As you can guess they "met a man in a pub" who asked them to look after his house for them which was full of nice plants and he asked them to water them for him while he was away.......they thought they smelled a bit funny but couldn't see anything wrong in a bit of plant care......

by Romain Garcin

11:10 AM, 20th January 2014, About 8 years ago

Reply to the comment left by "Gary Nock" at "19/01/2014 - 10:57":

"You could bank it into a “client holding account” and then transfer the monthly rent each month into your “rental account” as if it were the tenants payment. This is particularly useful if it falls over two tax years. If it all falls into the one then there is no advantage."

If 6 months worth of rent is due and paid upfront, then whether you use the accrual basis or the cash basis of accounting it has to be accounted for as one transaction.
You might be able to account for it as "deferred income" and record it as "earned" on a monthly basis, which is perhaps what you suggest, providing accrual basis is used.
(I am no tax expert so this are just my 2p and questions)

by Jill Lundquist

13:32 PM, 21st January 2014, About 8 years ago

Reply to the comment left by "Ben Reeve-Lewis" at "10/01/2014 - 14:07":

Hi Ben,

I'm afraid you have a bit more work to do on your American slang! The patsy would be the victim, so in this case the landlord. The person masquerading as a respectable tenant would be a frontman, or a shill, in some cases a stooge (if they were doing it to benefit the criminal and wouldn't benefit themselves).

Anyway, when I moved to this country and had money but no credit history (and certainly no home-owning guarantors!), I'm very glad indeed that landlords were willing to do me the favour of renting to me in spite of my shockingly disreputable offer to pay the entire contract up front to reassure them that they would have no worries about getting the rent I owed them.

by Michael Barnes

14:14 PM, 30th January 2014, About 8 years ago

Reply to the comment left by "Gary Nock" at "19/01/2014 - 10:57":

There is no tax benefit in what you suggest.
Tax is payable based on when income is due, not when it is received.
Income is essentially due each day of the tenancy for tax purposes.

Therefore a six-month paymens spanning two tax years should be reported for the two tax years as 'rent due up to 5 April' and 'rent due from 6 April'.

by

21:31 PM, 4th February 2014, About 8 years ago

Not sure if any one else has said this?

If you take 6 months up front as a rental payment, legally you have to give 6 months notice, before you can even start the repossession process, although not many people know this...

I guess you could issue section 21 at start of 6 month fixed term AST but not sure if a judge would accept this? It certainly upsets people on the housepricecrash website!! (re: sword of damascus)

by Jeremy Smith

1:47 AM, 5th February 2014, About 8 years ago

Reply to the comment left by " " at "04/02/2014 - 21:31":

Mark st.,
although that might well be true,
in this particular case, it seems alot more complicated than that,
to get the full picture, you need to read all/every (from post no 1) post(s) on this thread.

Mark A. and his collegues have alot more insight than me, and alot of others, like me, that may have made assumptions and got it very wrong !!


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