Payment by letting agent of rent less fees received early

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    Payment by letting agent of rent less fees received early

    i am assuming that if I write into the tenancy agreement that the tenants must pay the rent (in our case a full year in advance - the tenants have bankruptcy issues) that the letting agent should release the rent less management fees to me on the “due date” - some weeks before the start of the tenancy. The letting agent are maintaining that they cannot release the monies until the start of the tenancy, despite whatever terms are written into the tenancy and management agreements. Any thoughts?

    #2
    This sounds like a, now, illegal, reservation deposit.

    Comment


      #3
      The agent isn't a party to the tenancy agreement so what you agree with them is controlled by your agreement with them, not the TA.

      You can't have rent "due" before the start of a tenancy, and, even if it was paid before it was due, that would be a deposit of some kind.

      I suspect that what you're doing isn't what you're actually trying to achieve and probably isn't legal.
      When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
      Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

      Comment


        #4
        Originally posted by leaseholder64 View Post
        This sounds like a, now, illegal, reservation deposit.
        How so?

        Rent is allowed under the TFA.

        Comment


          #5
          Originally posted by MdeB View Post

          How so?

          Rent is allowed under the TFA.
          Because rent isn't payable until the tenancy starts, so I would say it was a deposit against the initial rent payment, and, I would argue a holding deposit.

          Comment


            #6
            Rent can be paid before the tenancy starts. That happens in a lot of residential tenancies.
            What it can't be is "due" before the tenancy starts (it's normally due on the first day).

            So if it's paid in advance and, for some reason, the tenancy doesn't start, it would have to be repaid (because it never became "due".)
            When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
            Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

            Comment


              #7
              Originally posted by leaseholder64 View Post

              Because rent isn't payable until the tenancy starts, so I would say it was a deposit against the initial rent payment, and, I would argue a holding deposit.
              Schedule 1 para 3(2) says
              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).
              .

              As the intention is not that it be dealt with in accordance with Schedule 2, then it cannot be a holding deposit.

              Why is rent not payable until the tenancy starts?
              Is there law that overrides any contractual obligations?

              Comment


                #8
                Originally posted by MdeB View Post
                Why is rent not payable until the tenancy starts?
                Is there law that overrides any contractual obligations?
                Rent can be payable at all sorts of points.

                It can't be "due" before the start of a tenancy because if that's just not possible, in the same way that a tenant can't have possession before the tenancy begins.

                Money paid before a tenancy starts as "rent" is a deposit paid which is converted to rent when the tenancy begins.
                Which is converted into rent when the tenancy begins and rent is "due" (which is also why rent shouldn't be paid more than 30 days in advance of being due).
                When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                Comment


                  #9
                  I started this thread and would like to thank all those who have contributed to date.
                  Your responses have raised a number of issues and effectively posed additional queries:
                  1. Is the early payment a reservation deposit? I have my doubts (see below).
                  2."Rent cannot be "due" before the start of the tenancy" - why not? My letting agents have been quite happy to include special clauses to the contrary.
                  3. Perhaps what is of greater interest is can a LANDLORD receive rent before the start of a tenancy? Clearly, letting agents can, although, in my case, the latter are saying that they act as "stakeholders" until the tenancy starts. It obviously suits them to say this, but is it correct legally?
                  4. If rent can be paid before the tenancy starts, can the landlord receive the same less fees if the management agreement provides for the same, e.g. 5 days after receipt of the funds by the letting agent? (See also (3) above).
                  5. "Holding deposit" - by the definition provided this is "money paid before the grant of a tenancy". If a tenancy has been "granted" by (a) the signing by both parties of the TA and (b) the payment of rent (in our case for a full year in advance), then how can the rent paid be a holding deposit?
                  All additional contributions gratefully received.

                  Comment


                    #10
                    My take (Ianal):
                    Originally posted by M Clavell View Post
                    1. Is the early payment a reservation deposit? I have my doubts (see below).
                    I believe not, but not for the reasons you have given.
                    See post #7.

                    Originally posted by M Clavell View Post
                    2."Rent cannot be "due" before the start of the tenancy" - why not? My letting agents have been quite happy to include special clauses to the contrary.
                    Because that is what the law says. (others will be able to point at appropriate law; probably common law).
                    Rent becomes due under a tenancy; there is no tenancy until possession has been given to the tenant.

                    However, as jpkeates says, rent can be payable at any time, as agreed between the parties.

                    Originally posted by M Clavell View Post
                    3. Perhaps what is of greater interest is can a LANDLORD receive rent before the start of a tenancy?
                    Technically no.
                    LL can receive payment that is to be used as rent when rent becomes due under the tenancy.

                    Originally posted by M Clavell View Post
                    Clearly, letting agents can, although, in my case, the latter are saying that they act as "stakeholders" until the tenancy starts. It obviously suits them to say this, but is it correct legally?
                    What the agent does is done on behalf of the LL, so technically agents cannot receive rent before the tenancy starts.

                    Originally posted by M Clavell View Post
                    4. If rent can be paid before the tenancy starts, can the landlord receive the same less fees if the management agreement provides for the same, e.g. 5 days after receipt of the funds by the letting agent? (See also (3) above).
                    Rent cannot be paid before the tenancy starts(see above).
                    However, assuming you mean "if payment to be used as rent under a tenancy can be taken before the tenancy starts" (which it can), then the answer is "yes", but no reputable agent would pass on the money before the tenancy starts.
                    If tenancy does not go ahead, then the (non-)tenant can reasonably expect to get the money paid back from the agent, but if the agent has passed it to the LL, then that makes things difficult for the agent.

                    Originally posted by M Clavell View Post
                    5. "Holding deposit" - by the definition provided this is "money paid before the grant of a tenancy". If a tenancy has been "granted" by (a) the signing by both parties of the TA and (b) the payment of rent (in our case for a full year in advance), then how can the rent paid be a holding deposit?
                    A tenancy is not granted until possession is given to the tenant.
                    Signing the TA is a record of the intent to grant a tenancy.

                    Comment


                      #11
                      The post above is pretty much spot on - this is additional to that.
                      Originally posted by M Clavell View Post
                      2."Rent cannot be "due" before the start of the tenancy" - why not? My letting agents have been quite happy to include special clauses to the contrary.
                      Ask them why it might be a problem - it probably won't have occurred to them.

                      It might be worth asking them how it's not a prohibitted payment under the Tenant's Fees Act, which only allows rent paid "under a tenancy", which this is not.

                      "Rent" isn't just a sum of money that is given by someone to someone else, it's an essential part of a lease.
                      It doesn't even have to be money* (it could be and used to be a service, for example).

                      Money can be handed over before a lease starts, but the lease is what makes the payment rent, it can't be "rent" before the lease begins.

                      As it's some kind of payment intended to be used for a specific purpose in the futute, I think it's a deposit of some kind (and it almost certainly is in terms of the Housing Act 2004).
                      3. Perhaps what is of greater interest is can a LANDLORD receive rent before the start of a tenancy? Clearly, letting agents can, although, in my case, the latter are saying that they act as "stakeholders" until the tenancy starts. It obviously suits them to say this, but is it correct legally?
                      I suspect that means that the agent is treating it as a deposit as well.
                      Because that's the basis on which agents conventionally hold deposits.

                      It would be helpful to know on whose behalf they are acting as stakeholder and what will trigger the release of the money - normally it would be a tripartite agreement, between you, the tenant and the agent.

                      My guess is that they're holding the money on trust until the tenancy begins (and the rent becomes due).

                      *It probably does nowadays, the feudal system is probably not human rights compliant. PC gone mad!
                      When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                      Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                      Comment


                        #12
                        Thanks again for your responses. I thought that I'd let you know that I've just had the following legal advice:
                        1. A TA is "granted" once it has been signed; it appears that it is not necessary for the tenant to have occupied the property for the tenancy to have been granted.
                        2. In the circumstances I have described, the letting agent CAN pass rental monies onto the landlord before the tenancy start date "if the agent wants to".
                        3. For a tenancy starting on 1.6.19, if the TA is signed before 1.6.19, then the Tenants Fees Act does NOT apply. (This relates to my earlier post dated 14.6.19).

                        Comment


                          #13
                          Originally posted by M Clavell View Post
                          3. For a tenancy starting on 1.6.19, if the TA is signed before 1.6.19, then the Tenants Fees Act does NOT apply. (This relates to my earlier post dated 14.6.19).
                          That's only partially true. From 2020-06-01 even contracts entered before 2019-06-01 are affected.

                          Comment


                            #14
                            1 - "Granting" a tenancy is not the same thing as the start of a tenancy.
                            2 - I don't think anyone has suggested otherwise. However, the "rental monies" will still be a deposit if due before the tenancy starts.
                            3 - For 12 months. However, s213 Housing Act 2004 does apply.
                            When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                            Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                            Comment


                              #15
                              Originally posted by M Clavell View Post
                              1. A TA is "granted" once it has been signed; it appears that it is not necessary for the tenant to have occupied the property for the tenancy to have been granted.
                              Assuming TA means Tenancy Agreement: a Tenancy Agreement is not a tenancy; it is the terms under which a tenancy is granted.

                              Comment

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