Can L take first + last months' rent pro deposit?

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    Can L take first + last months' rent pro deposit?

    Wondered if the legal bods here could answer this one,
    A Landlord has just asked us to manage his property, he doesn't 'believe' in any of the deposit schemes and wants to take 1st & last months rent.

    Is this ok to do and how can we specify this in the AST?

    Thanks

    Gareth
    Ambition is Critical

    I don't profess to be a knowledge in all areas, my advice is based on life experience.

    #2
    Originally posted by J4L View Post
    Wondered if the legal bods here could answer this one,
    A Landlord has just asked us to manage his property, he doesn't 'believe' in any of the deposit schemes and wants to take 1st & last months rent.

    Is this ok to do and how can we specify this in the AST?

    Thanks

    Gareth
    So basically he wants to take two month's rent in advance? Does that mean that the tenant will not have to pay rent for the last month of the tenancy? I.e. for a 6 month tenancy, tenant will pay 2 months rent at start of agreement and then 4 monthly payments, so last payment will be at the start of the penultimate month of the agreement?

    I don't think that would illegal, but if the landlord is taking the last month's rent to cover any damage, then it is a deposit no matter what you call it and must be covered by TDS.

    Peter

    Comment


      #3
      P.S. just found this Q&A on communities.gov.uk:

      Q.12

      No. Rent paid in advance is not a deposit. However, you will have nothing to offset against damage etc. at the end of the tenancy and your tenant will stop paying his rent two or three months before the tenancy ends.
      Hope that helps.

      Peter

      Comment


        #4
        Hi and thanks for your replies,
        Yes it is 1st and last months rent and no deposit, thus evading (and I use this term lightly) the need to protect a deposit.

        pcwilkins - I think there is a chance that this may occur but the Landlord seems to think it's a better way sos I'm going along with it. Yes there doesn't seem to be funds to offset against damage and the like but he has insurance against this so he's not too worried.
        my question is, How do I write this in the AST?
        Last edited by J4L; 12-07-2007, 21:09 PM.
        Ambition is Critical

        I don't profess to be a knowledge in all areas, my advice is based on life experience.

        Comment


          #5
          Originally posted by J4L View Post
          Hi and thanks for your replies,
          Yes it is 1st and last months rent and no deposit, thus evading (and I use this term lightly) the need to protect a deposit.
          I still don't see the point of specifying "first and last month's rent". Why not just "two month's rent in advance"?

          pcwilkins - I think there is a chance that this may occur but the Landlord seems to think it's a better way sos I'm going along with it. Yes there doesn't seem to be funds to offset against damage and the like
          Not just "there doesn't seem to be" --- there isn't!

          but he has insurance against this so he's not too worried.
          my question is, How do I write this in the AST?
          Take out the part regarding the deposit and insert instead some along the lines of "T agrees to pay first and lasts month's rent in advance".

          And don't forget to tell the T to cancel his standing order/direct debit so that he doesn't end up paying the last month's rent twice. Maybe I'm cynical but I can't help thinking that this is what the L is thinking might happen.

          It sounds like the L is trying to avoid scenario where T doesn't pay last month's rent, knowing that L probably won't bother chasing them. However I do wonder what would happen if the tenant was to stop paying rent. E.g. if T doesn't pay up for the penultimate month, what happens to the last month's rent that they've already paid? Is if forfeited? Not sure if there would be legal implications if it were.

          Sounds like a real can of worms. I'd advise might be easier just to charge one months in advance as usual. Talking about this plan and not taking a deposit in the same sentence does imply that the last month's rent is a kind of deposit.

          L is free not to take deposit but why simultaneously decide to take last month's rent in advance? Sounds fishy to me.

          Peter

          Comment


            #6
            Hi Peter, yes it does sound a little fishy but I can't see huge problems with it if the LL has insurance to cover damages or non payment. It seems to me that he's just trying to get out of paying a fee for protecting it and actually having it in his bank account.(I have offered him the free scheme but he's wary for some reason, I think LL's are cautious when they haven't got the cash in their 'back pocket') Also the fact that many tenants fail to pay the last month in fear that the LL will retain the deposit makes him feel a bit more secure holding it up front.
            I've written the AST as you have suggested making it very clear that the Tenant is paying the 1st and the Last months rent

            "if T doesn't pay up for the penultimate month, what happens to the last month's rent that they've already paid? Is if forfeited? Not sure if there would be legal implications if it were."
            I have consulted the LL with this very same question and he thinks that should the T miss any payments then we just issue a section 8 and 21 straight away. There will ALWAYS be a last months rent because of the notice period!! Thus he's trying to minimise the risk and a hefty loss at the end! I don't see too many flaws with this to be honest!! (unless they trash the place aswell)
            I'm sure someone will though! haha
            Ambition is Critical

            I don't profess to be a knowledge in all areas, my advice is based on life experience.

            Comment


              #7
              In order to issue a S.8 the tenant would have to be 2 clear months in arrears, so you won't be able to issue this notice as soon as the tenant has missed one months payment.

              Comment


                #8
                just in case the LL is having any ideas about being able to deduct damages from any accidental overpayment of rent, it's probably worth reminding him that, should the T take him to court, and the court view the 'last month' as a deposit, the LL will be obliged to pay 3 times the amount of that deposit, in addition to returning the entire amount regardless of any damages.

                The law in this area does seem to be designed to send a message of "It's a simple requirement, but if you don't observe it, it *will* cost you" - in that it gives the court no discretion when it comes to this extra fee.

                Comment


                  #9
                  What happens if the tenancy goes into a statutory periodic tenancy ? The agreement seems to suggest that the tenant has paid the first and the last (=sixth) month's rent. After the agreement runs out the tenant will have skipped his 6 month payment (because he's already paid it up front) and will then pay monthly with no "last month" in reserve anymore.

                  I guess your landlord must be thinking in terms of a fresh agreement after 6 months.

                  Comment


                    #10
                    I'm struggling to see what advantage over the TDS this gives an LL. In fact, I reckon a LL that implements this is at a disadvantage. Any dilapidations will have to be recovered via court process which seems to negate any perceived advantage of avoiding TDS.

                    I just don't get it.
                    Now signature free.

                    Comment


                      #11
                      Originally posted by J4L View Post
                      Hi Peter, yes it does sound a little fishy but I can't see huge problems with it if the LL has insurance to cover damages or non payment.
                      Perhaps not "huge problems" but the details would have to be very carefully worked out and I'm just not sure it's worth the hassle. I think you need to put a bit more thought into it, you can't just simply write on the agreement "tenant to pay first and last month's rent in advance".

                      It seems to me that he's just trying to get out of paying a fee for protecting it and actually having it in his bank account.
                      If it's not a deposit, he doesn't need to "get out of" protecting it. If it is a deposit then "getting out of" protecting it is illegal.

                      (I have offered him the free scheme but he's wary for some reason, I think LL's are cautious when they haven't got the cash in their 'back pocket')
                      But if you use his idea he still doesn't have any cash in his 'back pocket' --- he is not allowed to use the last month's rent to cover damages or arrears because if he does then that shows it was a deposit and should have been protected. It would only be allowed to be used to pay for the last month's rent. The whole point of TDS is that landlord's don't have any of the tenant's money in their back pocket, "just in case".

                      Also the fact that many tenants fail to pay the last month in fear that the LL will retain the deposit makes him feel a bit more secure holding it up front.
                      But if T has not paid a deposit, why would they fear that LL will retain it? What happens if T fails to pay penultimate month's rent?

                      I've written the AST as you have suggested making it very clear that the Tenant is paying the 1st and the Last months rent
                      What, the last month of the agreement (i.e. sixth month for a six month contract) or the last month they are in the property?

                      I have consulted the LL with this very same question and he thinks that should the T miss any payments then we just issue a section 8 and 21 straight away. There will ALWAYS be a last months rent because of the notice period!!
                      But if they don't pay (for example) 2nd month's rent, then what happens to the rent they have already paid for the sixth month? You can't use it to cover the arrears, or else it would be a deposit and should be protected!

                      Thus he's trying to minimise the risk and a hefty loss at the end! I don't see too many flaws with this to be honest!! (unless they trash the place aswell)
                      Again, if the last month's rent is being held to cover losses, then it is a deposit and must be protected.

                      Frankly I would tread very carefully as I think you are in a legal minefield, and if you get a tenant who is even slightly clued up you could get severely screwed.

                      For example, tenant moves in on 12 month contract, pays 1st and 12th month's rents. Decides to leave after 4 months so stops paying rent and moves out. What happens to the rent for month 12?

                      Peter

                      Comment


                        #12
                        Like i've said and i'm not questioning the answers here but 'regardless of whether the Tenancy runs to a periodic or not then the last months rent is the LAST months rent. Isn't it? If it runs periodic then surely the initial agreement stands?
                        "But if you use his idea he still doesn't have any cash in his 'back pocket'"
                        Yes of course he does he has the last months rent!!!

                        "What, the last month of the agreement (i.e. sixth month for a six month contract) or the last month they are in the property?
                        "

                        I've stated that it means the LAST month of the Tenancy in the AST! If it's a periodic tenancy it's still a tenancy!!

                        "But if they don't pay (for example) 2nd month's rent, then what happens to the rent they have already paid for the sixth month? You can't use it to cover the arrears, or else it would be a deposit and should be protected!"
                        Yup I agree, and I've explained this, I'm guessing that we go for accelerated possession and don't claim (privately) for the last month!

                        "For example, tenant moves in on 12 month contract, pays 1st and 12th month's rents. Decides to leave after 4 months so stops paying rent and moves out. What happens to the rent for month 12? "
                        I'm gonna have to think about this one actually! I'm guessing that if T moves out at month 4 then i'll have to word it that it's for the last months "paid rent"

                        Gareth
                        Ambition is Critical

                        I don't profess to be a knowledge in all areas, my advice is based on life experience.

                        Comment


                          #13
                          Originally posted by J4L View Post
                          Like i've said and i'm not questioning the answers here but 'regardless of whether the Tenancy runs to a periodic or not then the last months rent is the LAST months rent. Isn't it? If it runs periodic then surely the initial agreement stands?
                          Depends on the wording of the agreement. You would have to make clear that the "last month" referred to means the last month that the tenant occupies the house, not the last month of the fixed term.

                          "But if you use his idea he still doesn't have any cash in his 'back pocket'"
                          Yes of course he does he has the last months rent!!!
                          ...which he is not allowed to use for anything apart from to pay the last month's rent! So if T doesn't pay rent for month 3, L cannot seek possession until month 4 because T has already paid for month 3! Or has he? Or has he paid for month 6? And if he's already paid for month 6 what happens to that money? What if you seek possession and T says "Well I'll leave now, but I'll be back to live here for month 6 because I've already paid to live here then"?

                          "What, the last month of the agreement (i.e. sixth month for a six month contract) or the last month they are in the property?
                          "

                          I've stated that it means the LAST month of the Tenancy in the AST! If it's a periodic tenancy it's still a tenancy!!
                          If it's the "last month of the tenancy in the AST", that could be interpreted as meaning the sixth month of the tenancy, if it's a six month AST. Whereas you have said that what you mean is "the last month that the tenant is in the property".

                          "But if they don't pay (for example) 2nd month's rent, then what happens to the rent they have already paid for the sixth month? You can't use it to cover the arrears, or else it would be a deposit and should be protected!"
                          Yup I agree, and I've explained this, I'm guessing that we go for accelerated possession and don't claim (privately) for the last month!
                          So would you use the "last month's rent" to cover the rent for month 2, or is it reserved for month 6?


                          "For example, tenant moves in on 12 month contract, pays 1st and 12th month's rents. Decides to leave after 4 months so stops paying rent and moves out. What happens to the rent for month 12? "
                          I'm gonna have to think about this one actually! I'm guessing that if T moves out at month 4 then i'll have to word it that it's for the last months "paid rent"
                          Forgive me but I don't understand what you mean when you say 'i'll have to word it that it's for the last months "paid rent"'. Perhaps I'm being thick...

                          Peter

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