Guaranteed Rent Scheme with letting agent

[hodgevaldo]

First time in letting a home and I have had a person want to rent out our house who has bankruptcy notice against them.

I have stated to the letting agent that I do not want any risks in receiving my monthly income, so they have proposed there Guaranteed Rent Scheme where the letting agent is deemed to pay the landlord.

The key part in the contract between I and the letting is as follows.

The company has an absolute discretion as to whom the property may be let to. The company will ensure that the potential tenants have the right to live in the UK and are not fully relying on housing benefit to pay towards their rent. During the period of the tenancy agreement The Company will manage the Property on behalf of the owner and may take such legal proceedings, as it considers appropriate in relation to the property.

The Company will pay the agreed sum of 00000 per calendar month, for rent to the Owner each and every month on the 20th, starting from 20th April 2018, one month in advance until such time as the agreement is terminated

Are there any risks around this at all?

[nukecad]

Are there any risks around this at all?

Yes you will be letting to a company as a commercial rental, rather than to a tenant on an AST.

It's a whole different ball game.

To start with you will have no say about who is living in your property, you can't evict them because they are not your tenants, etc., etc.

If you have a 'standard' BTL mortgage it may not allow a commercial rental; you would need a commercial mortgage.
You would need to check your buildings insurance as well, and probably pay more.

[hodgevaldo]

Would you say its not advisable to go this route? what could happen? I am renting myself at the moment and I am in a position where I need to get rental income from the property asap.

[tatemono]

I do not want any risks in receiving my monthly income

am I right to read that as "I cannot afford to take any risks"? If so, perhaps letting your property isn't something you should do. It's fraught with risk and there are no guarantees. You have to be solvent enough to suck up any income disruption that you can reasonably foresee. For example, across five properties, we budget to sustain six months of void in any one year. That might seem excessive, but we'd prefer to err on the side of caution. Sounds like you should be doing the same and rent guarantee is likely to cost you a lot more in the long run than it will save you in the short run.

[jpkeates]

So the letting agent has access to a steady stream of customers, has a revenue stream and access to legal advice, funding sources and is the first to know that property is available.

Exactly what do they need you for?

I actually think they're possibly trying to be helpful - but ask yourself, why would they rent to someone you won't?

You can't be so desperate to rent that you cut corners. Save a few weeks pain now can incur months and months of pain down the line.

[AndrewDod]

Simple summary -- never ever get involved in schemes like this. Yes there are plenty of risks - too many for any sensible landlord to entertain.

[nukecad]

Would you say its not advisable to go this route?

For someone new to letting it's definitely not advisable.
Even experienced landlords shun such arangements as you can see from the above.

You may be lucky and have no problems, but can you afford the risk? It sounds not.

what could happen?

What's the worst you could imagine?
How about:
Agent goes bust (or does a runner), you're left with some drug addict/dealer/prostitute/etc. in your property who is not paying rent (doesn't even owe you rent because you are not their landlord), you can't evict them by normal routes (because you are not their landlord), it will take months if not years to get your property back, there will be outstanding bills, utilitties cut-off, and it will cost a fortune to repair all the damage that they have caused to you property.

People do enter into this sort of arrangement, but to do it sucessfully you need to have experience, have a large contingency fund for if/when things go wrong, and not be averse to taking large risks.

I am renting myself at the moment and I am in a position where I need to get rental income from the property asap.

Could you not surrender your current rental and move into the property yourself?
Sell the property?