Here is a question to the blog clinic from Liz who is a landlord:
I am a rookie landlord and learning the ropes. I am letting out my property and have found some private tenants. They wish to pay 6 months upfront rather than having a guarantor. Are we secure as landlords? Is there any way in law that they could ask for a proportion of the advance rent back? Many thanks.
Answer
So far as asking for the money back, technically I suppose your tenants could do this if the tenancy ended early. But they cannot unilaterally require the tenancy to end early – you would have to agree to this. So long as your fixed term is for at least six months, you cannot be forced to agree to an early surrender (save in exceptional circumstances, perhaps if the building burned down). So in reality there are unlikely to be circumstances where you would have to pay the money back.
However, the trouble about six months rent in advance is that it only protects you for those six months.
Most tenants stay longer than this. It is not unknown for a tenant to pay the initial six months rent in advance to get the property (or sometimes this is paid for them by a relative) but then fail to pay anything else. You then have the problem of dealing with a tenant in arrears of rent.
The important thing with all tenants is to reference them really, really carefully. For example, you need to ask for bank statements for the past 3 months to make sure they can afford your rent and get a credit report done. In view of the fact that it can take many months to evict a non-paying or bad tenant, it is really important that you do this thoroughly.
If you have reservations about someone I would prefer to see six months rent in advance AND a guarantor. Or better still, rent to someone else who seems to be better able to afford the property and who CAN provide a guarantor!
Note that guarantors should also be carefully referenced and ideally should be someone who owns property in the UK.
Some tenants, for example, overseas students, may struggle to find a guarantor. However, there are companies who for a fee will provide a guarantee on a tenant’s behalf. You can normally find them via search on the internet.
You should also be aware that often criminal tenants will offer to pay large sums of cash upfront on the basis that you will then not carry out many checks and will also leave them alone in the property. Then once they are in they convert the property to a cannabis farm. We have a post about this here.
Note that we have detailed guidance for my Landlord Law members on referencing tenants linked from my Landlord Law site checklist, plus we have forms of guarantee that you can use.
I am a tenant and have been one for some years now. My choice. I would not be able to provide a guarantor. I don’t know anyone who would want to do that and I can see why other, good and reliable paying tenants would not want this. It’s a huge ask and very demeaning where we both earn good money and can pay. Example: tenant has elderly guarantor. Tenant loses job and can’t pay rent. Landlord pursues money claim from guarantor and issues court proceedings . Charge is put against guarantor’s house. House is sold in repossession order and elderly man loses his home and becomes homeless. That is not right or acceptable to me. I would never, ever want to put anyone in that position. We are vetted by agents; some of those agents do it twice, whilst vetting other tenants at the same time, so that they can earn good money from it and then we have previous landlord references. Not all tenants want to put their family or friends in this position and it’s a huge ask. Some people may just want to pay up front. I did when I got divorced so I wouldn’t lose my home. You need to look at more than just ‘what if they don’t pay’. If you doubt them, then don’t take them, but this article has made all tenants out to be non paying bad people! Most of us aren’t you know. We just want to live and be left alone! And we pay and respect property!
Not all tenants are bad non paying people. But this post is giving advice to a ‘rookie landlord’.
Although you and many people like you are good and honourable people, there are bad people out there including criminals who may target inexperienced landlords and take advantage of them.
If an inexperienced landlord accepts someone who then fails to pay any rent at all (and this does happen), then the landlord may not be able to evict them for a very long time, during which time they (the landlord) will have to pay all their bills including their mortgage and are legally obliged to keep the property in repair. This could bankrupt the landlord.
Taking a guarantee is one way landlords can protect themselves. Others are getting rent paid in advance and buying rent guarantee insurance.
If tenants do not have a relative who can give a guarantee (and I agree it is a big ask) then there are guarantee companies that will do this for a fee. For example https://housinghand.co.uk/guarantor-service/.
How long does it take to cultivate a crop and six months of no visits from the landlord would assist.
Also, does taking 6 months up front mean the rent is paid 6 monthly rather than monthly or weekly and would this affect the Notice period of a Section 21?
Inspection visits are critical and landlords should not be persuaded by tenants to leave them alone! We have a kit for landlords on this here: https://landlordlaw.co.uk/sales-property-inspection-kit/
How the rent is paid can sometimes affect the notice period of section 21 notices, so you need to be careful how you word your tenancy agreement.