No more taking rent before signing?

[DPT57]

ARLA says that the practice of asking for rent/deposit in cleared funds prior to signing the TA will no longer be possible due to the wording of the Tenant Fees Act. See: https://thenegotiator.co.uk/tenant-f...t-months-rent/

[Kape65]

I guess the TA will have to be worded so that no contract exists unless said payments are made and there's no need to hand over keys until funds are cleared.

[JK0]

I guess the TA will have to be worded so that no contract exists unless said payments are made and there's no need to hand over keys until funds are cleared.

Ah, well, the problem is that any funds paid before tenancy signed are limited to one week's rent. My tenants will be asked to show up on start day with pound notes from now on.

[KTC]

Looking at it from a tenant's point of view for a moment, this is a feature, not a loophole!

Someone being asked to hand over a few hundred to over a thousand pounds, yeah you better have a contract already.

Don't think there's anything stopping a contract saying tenancy to start X/Y/Z, rent payable in cleared fund in advance on X-?/Y/Z, possession won't be given unless that happens, and if not contract terminated. (Obviously need a lawyer drafting that in legalese.)

[cymro123]

Yes JKO Is right I believe. On a separate but related note when does the Tenancy Deposit and rent become legally due? Is it a. When the TA is signed b. When the tenancy starts? Am I right in saying the TA could legally and reasonably stipulate the Tenancy Deposit and rent are due on signing of the TA?

[Ted.E.Bear]

“It means that anything you take before an agreement, any money taken in advance, is treated as a holding deposit."

Without him explaining why he thinks that, it isn't at all obvious to me - it seems to me that it should be treated as a 'holding deposit' only if that is it's purpose.

In this Act “holding deposit” means money which is paid by or on behalf of a tenant to a landlord or letting agent before the grant of a tenancy with the intention that it should be dealt with by the landlord or letting agent in accordance with Schedule 2 (treatment of holding deposit).

I think, in practical terms, it's easy enough to distinguish an early rent or deposit payment from a holding deposit. (e.g, would hte money be returned if the prospective tenant were to withdraw before the tenancy starts?)

[KTC]

(e.g, would hte money be returned if the prospective tenant were to withdraw before the tenancy starts?)

That doesn't help, since landlords/agents are supposed to return holding deposit in most situations if no tenancy is eventually agreed anyway per the Tenant Fees Act.

[cymro123]

The article states 'the act prohibits any payment to be made prior to the signing of a tenancy agreement.' But does the TFA actually state that (ignoring the obvious holding deposit)?

[KTC]

A landlord / letting agent must not require a relevant person to make a prohibited payment to the L/LA/3rd party in connection with a tenancy of housing in England.

For the purposes of this section, a landlord requires a relevant person to make a payment, enter into a contract or make a loan in connection with a tenancy of housing in England if and only if the landlord— (a) requires the person to do any of those things in consideration of the grant, renewal, continuance, variation, assignment, novation or termination of such a tenancy, .....

Any payment which is not specifically allowed is a prohibited payment.

If you require the perspective tenant to pay you the "rent" in clear funds before you will sign the tenancy agreement, that is clearly requiring them to make a payment in consideration of the grant of a tenancy.

Again, this is a feature, not a loophole.

[Ted.E.Bear]

Any payment which is not specifically allowed is a prohibited payment.

and rent is specifically allowed.

[KTC]

and rent is specifically allowed.

"A payment of rent under a tenancy is a permitted payment."

You haven't signed a tenancy agreement yet, there's definitely no tenancy yet, there's no payment that can possibly be classified as rent. You may intend the payment to discharge the liability for rent once there is a tenancy, but at the time the payment is taken in such situation, it's not rent.

[boletus]

I can easily see one of the rabid anti landlord councils attempting to enforce a penalty for this but I'd hope the First-tier tribunal would make a sensible judgement and dismiss it completely as the legislation states any penalty has to be fair and proportional.

i.e There has been no loss to the tenant so there should be no penalty (unlike deposit protection penalties).

[boletus]

https://assets.publishing.service.go...ordsAgents.pdf

Should you, in error, ask a tenant to make such a payment, you should return the payment immediately and must return this within 28 days. If you do not return the payment within 28 days, you will be treated for the purposes of the Act as having required the tenant to make a prohibited payment (a payment that is outlawed under the ban).

[DPT57]

https://assets.publishing.service.go...ordsAgents.pdf

Should you, in error, ask a tenant to make such a payment, you should return the payment immediately and must return this within 28 days. If you do not return the payment within 28 days, you will be treated for the purposes of the Act as having required the tenant to make a prohibited payment (a payment that is outlawed under the ban).

So does this mean that if you take the first months rent and deposit less than 28 days before the tenancy begins then it is a prohibited payment until the tenancy begins at which point it is converted into rent and deposit and the breach is corrected? Are there other problems with this approach? S21?

[DPT57]

Alternatively, perhaps a landlord use s1(7) of the Act to give the tenant the option of either paying the rent and deposit into their account a few days before the tenancy begins or turning up on move-in day with the cash.