Reservation Fee - Depost protection

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    Reservation Fee - Depost protection

    Once I have found willing tenants I need to carry out some admin to get guarantors before the AST can be signed. I'm tired of people changing their mind halfway through.

    Option 1:

    I ask prospective new tenants to pay a £100 reservation fee if they intend to take the house (subject to contract). In return I will give them a receipt confirming that they have X days to provide correctly completed guarantor forms during which time I promise not to grant the tenancy to anyone else.

    If they pull out or fail to provide guarantors by X days and the tenancy is not granted to them, I get to keep the reservation fee, right?

    If I agree to reserve the property and take the fee, so long as they comply with my conditions within X days, am I obliged to grant them the tenancy? Or, am I just obliged not to grant it to anyone else for X days and give them a refund if I pull out for no good reason?

    Therefore, could I find that a tenancy contract is created by virtue of the prospective tenants meeting the conditions of the reservation or must a tenancy agreement still be signed? How to avoid this?

    I don't mind refunding if I pull out. Also, I want to credit the fee towards the rent should the AST go ahead so that the T is not out of pocket.

    Do I need to put the reservation fee in a protected deposit scheme as it's only a "holding deposit" and a the time it is taken they are not yet tenants?

    I want to keep the reservation fee and the tenancy deposit as seperate entities, so that I only need to register the tenancy deposit.



    Option 2.

    Can I alter the tenancy agreement so that everyone signs it including LL and the full deposit is taken, but the tenancy agreement is granted subject to getting guarantor forms within X days after the signing stating that no binding contract exists until the guarantees are in place?

    The guarantor forms I have state that they must be signed before the AST or they won't be valid. Otherwise they are not a consideration of granting the AST,right?

    Seems a little shaky?

    Option 3.

    T and LL sign and date the binding AST contract which is subject to guarantors being provided within 14 days and take the deposit. The contract completes when I receive the guarantees - a bit like a house purchase where I gave the solicitor a signed contract with no date on and he exchanged a took deposit and it completed a week later with the balance being paid.

    I presume the deposit needs to be protected in this case, but what happens if the guarantees are not given by the completion date? Will DPS make me give back the deposit?

    I don't want extra money, just commitment. Whats the best way to deal with this?

    #2
    holding deposit form

    I just found the holding deposit form on :http://www.landlordzone.co.uk/agreements_registered.htm (2nd link under "moving in" heading)

    I am confused as to why the holding deposit and the tenancy deposit are featured on the same form? Can't you just use the bit about the holding deposit?

    Comment


      #3
      I didn't want to trawl through your post so could answer me this:
      do you let to students, dss or people who are unemployed? If not they shouldn't need a guarantor as long as they are earning around 33x the rental as salary. I personally would use a referencing company and get yourself rent and legal guarantee.

      If a guarantor is a necessity I would insist on meeting them to sign the contract. You will need to reference them too. At least you know it is all legit and the guarantor agreement has not been forged!

      Comment


        #4
        Students. their parents can live in four corners of britain so visiting is not practical. letting competition is fierce here. tenants can't be bothered with credit checks and references and will go elsewhere if the ll is too fussy. it's hard to get a guarantor at all. at the end of the day you have to take a risk or end up with empty house.

        Comment


          #5
          Originally posted by bureaucrazy View Post
          I don't want extra money, just commitment. Whats the best way to deal with this?
          Once again we have posters trying to get round things that are not easily got round. The plain fact is that prospective tenants change their minds and landlords have to put up with it. I cannot think of any other business where those offering a service are only willing to do so on the basis that they only negotiate with those prepared to put money up front to talk to them.

          I refer to this thread: http://www.landlordzone.co.uk/forums...ad.php?t=13840

          The conditional contracts you propose are perfectly possible, but they need to be drafted by someone who knows what he is doing. There is also the very strong possibility that such agreements will be regarded as unfair under the Unfair Terms in Consumer Contracts Regulations for the simple reason that many people will not understand the full implications of signing a conditional contract.

          Sophisticated documents and procedures are best reserved for complex deals and left to lawyers to draft and complete. If you try and complicate straightforward deals with complex arrangements you are likely to come unstuck.

          Comment


            #6
            I second lawcruncher's comment.

            I gather from this and a previous thread on a proposed 'tidy up' clause, that you're unusually keen to create some kind of ultimate foolproof tenancy contract, one which gets around all the things you find inconvenient about being a landlord (such as the mysterious lack of 'messyness' as a ground for eviction).

            You are living in cloud cuckoo land, and doubly so if you think there is any chance of achieving your goal by asking questions about drafting on a forum. Anything you draft yourself/DIY will almost certainly be totally unforceable.

            Your only hope is to pay good money to a good, specialist solicitor to draft the contract for you - and even then, as lawcruncher says, the terms may still be argued to be unfair.

            Comment


              #7
              It is also important to realise that a legal document is not an infallible means to ward off the evil eye. Having rights under a contract is one thing and enforcing them quite another. Whilst a tightly and clearly drafted document is better than a loosely and ambiguously worded one, what is more important is getting the right tenant and there is certainly no magic formula to ensure that.

              Comment


                #8
                Originally posted by koolkitty7 View Post

                If a guarantor is a necessity I would insist on meeting them to sign the contract. You will need to reference them too. At least you know it is all legit and the guarantor agreement has not been forged!
                It is not always necessary or practical to meet the guarantor. Parents of students are an obvious example, as OP says. We let to students and make a point of contacting parents by phone to introduce ourselves and ask if they have any questions about the guarantor commitment. Then we send the paper work ensuring they have enough time to read it, seek legal advice if necessary and that they understand they are signing and having witnessed a Deed, which is legally binding. We provide stamped envelopes for its return and we telephone the witness at work to check they exist.

                I agree that a well-drafted Deed and having all the correct paperwork in place is not a copper-bottomed guarantee when it comes to letting, although it makes it more likely that yo9u will get the rent in the end. Having said that, the majority of students expect to have to produce a guarantor and most parents are willing and able to comply (it means their children are safely housed, in the end), especially if the property is high-quality, well-maintained and professionally managed (and by that I do not mean by a letting agent!) OP's philosophy sounds like a formula for disaster, to me.
                'Pause you who read this, and think for a moment of the long chain of iron or gold, of thorns or flowers, that would never have bound you, but for the formation fo the first link on one memorable day'. Charles Dickens, Great Expectations

                Comment


                  #9
                  If I were OP's prospective tenant, I'd get the impression the LL was trying to pull a fast one, and move on to the next LL who doesn't insist on such conditions.

                  Comment


                    #10
                    Originally posted by koolkitty7 View Post
                    I didn't want to trawl through your post so could answer me this:
                    do you let to students, dss or people who are unemployed? If not they shouldn't need a guarantor as long as they are earning around 33x the rental as salary. I personally would use a referencing company and get yourself rent and legal guarantee.

                    If a guarantor is a necessity I would insist on meeting them to sign the contract. You will need to reference them too. At least you know it is all legit and the guarantor agreement has not been forged!
                    Second not meeting the guarantor - we have about 70 or 80 student homes - there is no way we could meet 300+ guarantors.

                    I would always get guarantors if there is any doubt about the tenant, hopefully you made a typo regarding the rental multiplier there - I would need to be on 180k a year to qualify to pay my rent!!!!!
                    Liability statement. My liability to you is not to exceed the amount you are paying for my recommendations or advice.

                    I see a bright new future, where chickens can cross the road with no fear of having their motives questioned

                    Comment


                      #11
                      Originally posted by mind the gap View Post
                      ...and we telephone the witness at work to check they exist.
                      An unnecessary precaution. I would go further and positively discourage it.

                      (An explanation is available upon request.)

                      Comment


                        #12
                        Originally posted by Lawcruncher View Post
                        An unnecessary precaution. I would go further and positively discourage it.

                        (An explanation is available upon request.)
                        An explanation is requested, please...
                        'Pause you who read this, and think for a moment of the long chain of iron or gold, of thorns or flowers, that would never have bound you, but for the formation fo the first link on one memorable day'. Charles Dickens, Great Expectations

                        Comment


                          #13
                          The relevant part of the Law of Property Miscellaneous provisions Act 1989 says:

                          An instrument is validly executed as a deed by an individual if, and only if it is signed by him in the presence of a witness who attests the signature.

                          So, not only does a deed need to be witnessed, but it must be signed in the presence of the witness. Is a person relying on a deed put on enquiry as to whether the strict requirement has been complied with? No. He is entitled to rely on what the document says; i.e. Signed by X in the presence of... If it were otherwise no one could ever be sure if a deed had been properly executed.

                          There is a rule of law that no statute may be used as "an engine of fraud" (Rochefoucauld v. Boustead). If you present a deed as having been duly witnessed the person who accepts it is entitled to assume that it was. So, you cannot sign a deed and witness it yourself, but later argue that the deed was not validly executed. There was a case where a mortgage (I think it was) was executed by individuals but when the witnesses were in another room. Their argument that the mortgage was invalid as it had not been validly executed failed to convince the court. The court said that there was no way the lender could have known the circumstances of the execution. By handing over an apparently validly executed deed the borrowers represented that the deed had been correctly executed and the lender was entitled to assume the document had been properly executed. The same must apply where the witness is fabricated.

                          So, if presented with an apparently correctly executed deed you need make no enquiry of the witness. The rule of thumb in the law is that if you do not need to make enquiries you do not make them in case you learn something you do not want to have notice of.

                          None of the above helps of course if the guarantor's signature is forged.

                          See this thread where there is further discussion about executing deeds: http://www.landlordzone.co.uk/forums...ad.php?t=25595

                          Comment

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