A ‘rent to rent’ arrangement is one where (as in the picture above) a property owner rents a property to someone, not so they can live there themselves, but so they can sub-let it to tenants.
So there are three parties to the arrangement:
- The property owner
- The ‘rent to rent’ landlord and
- The tenants (or sub-tenants from the point of view of the property owner)
This is quite a common arrangement and when it works it can work very well –
- The property owner gets an income from their property without having all the work of managing the lettings, and
- The ‘rent to rent’ landlord is able to earn money as a landlord without the expense of having to buy a property
Examples of situations where ‘rent to rent’ arrangements have been known to work well include:
- Letting agents who take over the management of a property as the tenant of the property owner rather than as agent
- Universities and colleges who use the properties as accommodation for their students, and
- Local Authorities who use the property to house homeless applicants
However, it can go spectacularly wrong:
For the property owner
You may find that the rent stops, and your ‘rent to rent’ tenant has vanished having taken large sums upfront from the occupiers. You will then be left with sub-tenants who you cannot evict or claim rent from as they have already paid this to the rent to rent landlord.
Plus it is not unknown for property owners to find that they have signed away all their rights in a tenancy agreement provided by the ‘rent to renter’ which they failed to read or have independently checked before signing.
For the Rent to Rent landlord
After you have committed yourself, you may find that you are out of pocket because you have failed to take into account all the expenses that come with being a landlord. These include gas and electrical checks, the cost of keeping the property in repair, and (in most rent to rent situations) the cost of getting an HMO license from the Council, along with the cost of all the improvements the Council may demand as a condition of this.
You may find that you are doing all the work of managing the property but without actually making any money from it.
Help is at hand
To help all rent to rent landlords and property owners, Landlord Law will be running a special event, a Rent to Rent Training Day, in collaboration with JMW Solicitors on 4 November 2020.
This will be a virtual event, which you can watch in the comfort of your own home, learning from solicitor and rent to rent expert David Smith, along with additional talks from solicitors Neli Borisova and Bernard Ralph.
You will attend talks on:
- What is rent to rent?
- Advice for property owners
- Advice for ‘Rent to Renters’
- Common rent to rent problems, and
- HMO’s and planning
Plus you will attend a one hour Q&A session at the end of the day where you can put your questions to the speakers.
After attending this event you should be in a position to set up and manage a profitable rent to rent arrangement. Or, if you are currently in a problematic rent to rent arrangement, learn the best way to deal with it.
A ‘rent to rent’ tenancy agreement
Many of the problems with rent to rent arrangements flow from the tenancy agreement used.
Frequently this is inadequate and has inappropriate clauses, some of them hugely detrimental to one or both parties. Sometimes it will just be a standard AST with some of the clauses crossed out, which is totally inappropriate.
However, it is hard to find a decent rent to rent agreement and the cost of getting a bespoke agreement drafted can be in the region of £1,000-£2,000.
To help, David Smith is drafting a special rent to rent agreement which can be purchased, either as part of the event cost or separately via the delegates page. It is only available to delegates.
You can find out more about this and the event generally in the video below:
The cost of the event is £120 (inclusive of VAT) or £420 with the special ‘rent to rent’ tenancy agreement, but Landlord Law Blog readers can get a £10 discount with the coupon code LLBG5FP4.
Plus, if you are a landlord you should be able to offset the cost against your tax bill.