1 month Rent up front ?

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  • amy131
    replied
    Yes there are advantages for the tenant of being able to pay more rent upfront. One of the issues in New York due to the new law there is that people with poor credit, students etc. are being affected as they can't pay for a number of months upfront so landlords just don't take the risk of renting to them.

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  • amy131
    replied
    Having spent some time in the US I know that having to pay first and last months rent in advance plus security deposit is quite common there, apart from New York where this is now illegal. I have never heard of landlords requiring last months rent in advance in the UK though until seeing a few posts on this forum about this. If the landlord does this without taking a deposit it seems to me that its just a way of not having to use a deposit protection scheme. As a landlord I've once had to make a deduction from the deposit for two weeks of unpaid rent so its possible those who have such arrangements as this poster is suggesting think that deposit deductions are mostly due to unpaid rent and aren't considering damage at all. That particular tenant of mine damaged furniture in the room also and I made a deduction to remedy that too. So this particular example shows that the arrangements the poster proposes are flawed.
    I don't know if some landlords are being influenced by what is done overseas to some extent, I guess if this starts happening more then laws here may be revised.

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  • DPT57
    replied
    Originally posted by Lawcruncher View Post
    If anything, paying a month's rent in hand instead of a deposit is better for a tenant.
    Its certainly better for a tenant. I think the risk is all with the landlord. If he forgets that he mustn't accept rent in month 6 or 12 or whichever is the last month of a fixed term and doesn't refund any that is paid inadvertently, then he risks a deposit penalty case against him. Whether the unprotected deposit is considered to be the extra payment he took at the start of the tenancy, or the one that was paid in month 12 that he forgot to refund, the tenant would still probably have a case.

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  • Lawcruncher
    replied
    If it is asserted that a payment made by a tenant is a deposit you have to consider the position immediately after the payment is made. Whether considering a month in hand or last month payment, the argument that the payment is a deposit turns on the payment relating to a future period which does not start on the day the rent is due. Whether the start of the period is known or not is not really important if that is the argument. My essential point is that such payments are not deposits because they are not security in the sense that they are held to ensure compliance with the tenant's obligations and because the tenant does not expect the money back. If everything goes as planned, when the tenancy ends the landlord will not have any funds to return to the tenant. If the tenant pays all rent when the agreement says he must and does not pay the last month, the landlord has over the tenancy received the same rent he would have received if the payments had been made "normally".

    The purpose of the deposit legislation was to ensure that landlords do not retain deposits unless justified. If anything, paying a month's rent in hand instead of a deposit is better for a tenant. At the end of the tenancy he can vacate and go on his way rejoicing and does not need to post on LLZ asking if it is normal to wait for six months to get his deposit back.

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  • jpkeates
    replied
    Originally posted by Lawcruncher View Post
    However, If the task is simply to establish whether the arrangement amounts to a deposit we have to restrict ourselves to considering the terms of the agreement without asking what happens if things go wrong.
    I think that the difference is that we are starting to look at this from different perspectives.

    I have seen a number of these agreements and none of them has ever specified anything other than the "last" month or months as being when the rent is being paid in advance.
    So the conditions that might make the arrangement acceptable have been missing from the examples I have any experience of, and my view of these arrangements is coloured by that start point.

    My (prejudiced perhaps) view is that these are unusual arrangements created to allow the landlord an advantage that the law specifically wishes them not to have.
    I don't agree with the legislation, it prejudices against people with low incomes or poor credit history, but it is the law.

    I have never had a tenant who simply didn't pay the last month of their tenancy having paid everything else up to that point, so perhaps I am missing the appeal of the arrangement - other than as an attempt by the landlord to hold more of the tenant's money than they are allowed to.

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  • Lawcruncher
    replied
    Originally posted by jpkeates View Post
    If the landlord serves notice and the tenant doesn't comply etc.
    I think that what you are saying highlights complications which may arise if things do not go smoothly. However, If the task is simply to establish whether the arrangement amounts to a deposit we have to restrict ourselves to considering the terms of the agreement without asking what happens if things go wrong.If there is no objection (a) to the tenant paying the first two months rent at the start of the tenancy and then paying monthly starting on the first day of the third month or (b) to the tenant paying a whole year's rent up front, I am having difficulty seeing why there should be a problem paying the first two months at the start of the tenancy and the third month's rent at the start of the second month.In a sense all rent paid in advance can be regarded as providing security for the landlord because he gets it before he has provided the service, but no one argues that rent must be paid in arrear to avoid it being a deposit.

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  • jpkeates
    replied
    Originally posted by Lawcruncher View Post
    If the tenancy is periodic with an initial long period some different drafting is required. The point is that (ignoring statutory intervention) whilst at the outset the parties will not know when the last month is they will when a notice to quit is served. Once the notice has been served the tenant knows when to stop paying rent.
    If the landlord serves notice and the tenant doesn't comply, the matter goes to court and then bailiffs.
    The periods of repossession and the lead time for bailiffs are both largely unknowable and can be quite short.

    It would be easy for a tenant to have rent due on the 1st of a month, be told by bailiffs on the second that they were being evicted on the10th. The last complete month might therefore not be known to the tenant until after it had begun and rent had been due (and possibly paid).

    I appreciate I am stretching things to the extreme to make my point, but the "last" payment month is not always knowable.

    As it is always possible for a tenant to surrender a tenancy, I don't really think that month 12 of a 12 month fixed term is "certain".

    It also looks, to me at least, as though Rent in Hand is not simply Rent (which seems to have an implication of regularity - but I can't find the text of the case that's cited as the best definition).
    In which case it's a prohibited payment.

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  • DPT57
    replied
    I think it hinges on what bigbjv would do in month 12 if the tenant didn't leave and a periodic tenancy arose. Would he charge him rent for month 12 in the usual way and let the month in hand carry forward. If so then at that point I think its likely to be viewed by a court as a deposit.

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  • Lawcruncher
    replied
    Originally posted by AndrewDod View Post
    Think we need to cut to the chase here. While it might be possible to make a case that the OP might get away with this strategy as a deposit alternative, it is extremely inadvisable and highly dangerous.
    I agree. Whilst I am fairly confident that my analysis is correct, there is no certainty that a busy county court judge will not see rent in hand as an attempt to get round the protection provided by Parliament. Even the higher courts cannot be guaranteed to reach decisions which do not confound the expectations of lawyers. The appeal courts in particular seem to relish making decisions which highlight the deficiencies in the drafting of statutes.

    Originally posted by AndrewDod View Post
    Don't agree with you Lawcruncher (at least from my perspective) that the predominant point of a deposit has to do with damages for most landlords.
    I was not suggesting that. I was just saying that landlords want deposits to cover damages and that rent in hand does not do that.



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  • Lawcruncher
    replied
    Originally posted by jpkeates View Post
    Well, it may continue if the tenancy agreement provides for it, but I was speaking loosely.

    What if the let continues beyond the initial 12 months?
    The OP seems to be saying that the tenancy is for 12 months which makes it fixed term. If that it was it is then presumably one way or another the agreement sets out what rent for which periods is paid when.

    If the tenancy is periodic with an initial long period some different drafting is required. The point is that (ignoring statutory intervention) whilst at the outset the parties will not know when the last month is they will when a notice to quit is served. Once the notice has been served the tenant knows when to stop paying rent.

    The important point in all this is that when the landlord receives the rent it is not being "held" to be applied as rent when the first day of the period to which it relates arrives. It is actually rent which just happens to be due before the period to which it relates.

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  • jpkeates
    replied
    I've not had many issues with claiming damage from a deposit, but I agree that rent is a bigger issue (and the limit to the deposit value the more incomprehensible).

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  • AndrewDod
    replied
    Think we need to cut to the chase here. While it might be possible to make a case that the OP might get away with this strategy as a deposit alternative, it is extremely inadvisable and highly dangerous.

    Don't agree with you Lawcruncher (at least from my perspective) that the predominant point of a deposit has to do with damages for most landlords. Unpaid terminal rent is far more important. Damages are extremely difficult to recover from the deposit, and often not worth the effort.

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  • jpkeates
    replied
    Originally posted by Lawcruncher View Post
    The tenancy does not in fact continue.
    Well, it may continue if the tenancy agreement provides for it, but I was speaking loosely.

    What if the let continues beyond the initial 12 months?

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  • Lawcruncher
    replied
    Originally posted by jpkeates View Post
    What if the tenancy continues beyond 12 months?
    The tenancy does not in fact continue. Assuming all the conditions are fulfilled, it will be followed by an SPT. Under the agreement the tenant will not have to pay any rent at the beginning of the last month. When the SPT starts rent payments will be "normal". Of course if the tenant intends to stay and pays rent at the beginning of the last month it will implied that the month-in-hand arrangement continues. However, I do not see how the landlord can insist on it.

    Rent in hand is fine for a lodger or lock-up garage. The security it gives is satisfactory because if the tenant does not pay the arrangement can be terminated without going to court. For an AST, apart from the possibility that a judge will find the arrangement involves a deposit, it can lead to complications or disputes and does not provide the security that a deposit does for damage caused by the tenant - which is what most landlords want.

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  • jpkeates
    replied
    Originally posted by bigbjv View Post
    How it works out for us is the last month is paid for. When they take out the AST 12 months but it’s works out 11 payments as we take the month in hand. 👍
    What if the tenancy continues beyond 12 months?

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