UK Landlord Forum / Life

Hello there, I am a private landlord and this is the first time I am renting out my flat and I would really appreciate some advice on the contract and deposit.

1) I intend to rent my flat to a company that will sublet it on a short term basis (from 1 to 6 months). I received the contract draft from them and not sure if this is the right type of contract (wanted to attach the draft here, but the website does not allow me). Even though they call the contract Company Let Agreement it looks to me that they structured it as a management agreement rather than tenancy agreement. Here is a paragraph from there:

"2. APPOINTMENT

The Owner appoints the Manager to manage the Property and the Manager accepts that appointment, in each case in accordance with the terms of the Agreement with effect from the Commencement Date to the expiry of the Term. The Owner herby permits the Manager to let the Property (in whole or in part) as serviced accommodation in accordance with the terms of this Agreement."

They refer to themselves as Manager rather than Tenant throughout the contract.

They will pay me fixed monthly payments and a deposit. They will pay all the bills (council tax etc) and transfer them on their name etc.

How would it be better to structure the agreement - as a common law tenancy
agreement that allows them to sublet or management agreement is ok? What could be pros and cons?

I am a bit confused with this.

2) I also want to ask them for a 2 months deposit - I understand it's ok as it's a company, is that right? Can I use a deposit protection scheme?

Thank you in advance!

If you're letting your flat out for the first time, letting to a company is not the best option. While there are many perfectly good rent to rent companies out there, many of them are as dodgy as heck.

That agreement is not a tenancy agreement and you would indeed be appointing them to manage the property (based on the short extract). There may be other elements that change that, such as describing the monthly fees as rent (and a deposit would not normally be appropriate in this kind of agreement - and it would be interesting what it is a deposit against.)

I would advise you to take proper legal advice if the company is providing the agreement, rather than using one from an independent third party or one prepared for you.

The answer to 2) is easier, yes and no because I'm sure it would breach their terms and conditions as it's not a tenancy.

In case that's a bit neutral, don't do it!

I really don 't see why you want to start off with something so complicated with potential for misery for you.  What' s wrong with a straightforward 6 months AST?

A non-Housing Acts agreement as a first-timer is not super wise. A lot of people are setting themselves up to manage these kinds of 'serviced' places... not just apartments, houses too... they are all over Landlord's adverts they find and it's a competitive arena, they will likely offer a premium, which is attractive, but many of us wonder what would happen if things really started to go wrong.

If you want complete hands-off, a premium rent and it suits your risk profile - jump in - but beware of who has control of things. I was recently approached by one of these outfits (seemed to be a woman and her husband who were looking to get in the game by getting properties on their books - their website offered no other properties). I went the other way, simply 'cos it's not what I do - and I figured - if the serviced business was so good and lucrative then why don't they just buy their own properties instead of remora-ing on Landlords. Not for me.

Thanks so much for your prompt replies.

I would have loved to get a proper legal advice but the guys asked me for so much money! I can't afford it at the moment unfortunately so trying to figure things out on my own as much as possible so really appreciate your input!

Regarding this:

Quote from: jpkeates on June 18, 2024, 12:27:57 PMThat agreement is not a tenancy agreement and you would indeed be appointing them to manage the property (based on the short extract). There may be other elements that change that, such as describing the monthly fees as rent.

In interpretation there is no mention of rent, only the below:
"Monthly Payments: £.... for 12 months with the intention to extend.
Payment commencement date:....."

But in the secion 'fees and payments' it mentions rent:

In consideration of entering into this Agreement, the Manager will be responsible for  the Monthly Payments and all outgoings in respect of the Property as detailed in  clause 3 of this Agreement
(ii) In consideration of entering into this agreement, the Manager will pay 2 months upfront rent. This covers the rental term from .... until .... 2024
(iii) In consideration for carrying out their duties under this Agreement, the Manager shall be entitled to retain any and all income arising out of the Property throughout  the Term, minus the monthly payments that are paid to the Owner.

Does the above make it tenancy?

Would a standard common law tenancy agreement protect me better? Or it's kind of the same risk?

Quote from: jpkeates on June 18, 2024, 12:27:57 PM(and a deposit would not normally be appropriate in this kind of agreement - and it would be interesting what it is a deposit against.)

- I'd like a deposit against damages to the property and if there are any missed payments to use to cover the rent, but yes. now not sure if it's within the scope

I am quite keen to go ahead with this arrangement as they will also deal with any breakage, repair etc plus cover some of those costs up to a certain amount. I don't live in the UK at the moment so it would be ideal for me not to deal with this. I get everyone's concern and I am reserved myself so trying to understand pros and cons and if it's worth it.

If you're not in the UK, I really think that you shouldn't do this.

Rent to rent has a terrible reputation at the moment, and this looks cleverer than the usual arrangement (which is definitely another red flag). Have a google for rent to rent problem.

Simple example. The company you sign up with "A" (essentially as an agent), let to another company they own "B", who lets it to a third company "C". Then company A and B are wound up (or just abandoned and struck off). Company C run the property as an HMO or fill it with people who live there.

Now, try and work out how to get your property back.

I've not had to do much to invent that example, by the way, someone asked for help with that last month.

Let via an agent to a family.

If you're a UK tax payer, the basic test for an agent is whether or not they know that they should charge more to send the rent abroad.

That you're contemplating this at all is scary.

I understand but any specifics on my contract question from my last comment before I make the final decision?

Thanks for taking the time to reply!

Not from me. You're about to drink poison and you're asking for advice on the shape of the glass.

If you can't understand that the basic idea is unsafe for you, any other input is pointless.

Have you ever watched a film where a woman is alone in a house, with a psycho serial killer hiding somewhere?  There is an open door and people outside, but she decides to go down to the cellar. It never ends well.

Let's split up!

Quote from: Tatiana on June 18, 2024, 04:48:36 PMI would have loved to get a proper legal advice but the guys asked me for so much money!

This is surely warning enough.

Don't do it.

Absolutely ridiculously stupid to even consider this. It will cost you thousands in legal fees to get the property back.

oh my, come on guys, may be enough of scaremongering? I understand you are all smart and I am a stupid newbie, but I did not ask a question whether I should do it or not, I asked something else.

Something constructive in relation to the questions, anyone?)

Don' t you see,  there is no constructive advice we can give other than " Don' t touch it with a bargepole"  No- one thinks it stupid to ask a question, I for one certainly do not know it all, and have made some very silly decisions and paid the price.  What is a bit stupid is to have a load of battle- scarred veterans telling you the same thing, then get arsy because they are truthful with you. 

I know you are going to go ahead with this, and it gives me no pleasure ( well, maybe a little bit given your attitude ) to say it will not go well. Quite apart from anything else,  what type of people will be living in your property?  I am thinking this might be your own residence, which will be an extra twist of the knife if it all goes tits up.   

Quote from: Tatiana on June 19, 2024, 11:47:54 AMI understand you are all smart and I am a stupid newbie, but I did not ask a question whether I should do it or not, I asked something else.

I don't think you're stupid, for a start you spotted a possible issue and asked questions, which is smarter than most.

But answering your questions may encourage you to proceed, which is a bad idea. And, to be fair to us, I have answered both your questions.

I'm running out of analogies, but imagine going to a forum of surgeons and asking the users which length of scalpel blade you should use to remove your own spleen. How constructively can someone realistically answer such a question?

There may be no stupid questions but there are definitely wrong questions.

Quote from: Tatiana on June 19, 2024, 11:47:54 AMoh my, come on guys, may be enough of scaremongering? I understand you are all smart and I am a stupid newbie, but I did not ask a question whether I should do it or not, I asked something else.

Something constructive in relation to the questions, anyone?)

It isn't scaremongering its advice because the landlord forums are littered with people asking how to exit these contracts. It's going to be expensive. Not taking legal advice because you can't afford to says it all. You're a fool. Good luck.

Quote from: jpkeates on June 19, 2024, 12:13:58 PMBut answering your questions may encourage you to proceed, which is a bad idea. And, to be fair to us, I have answered both your questions.

You did give me the most constructive answers indeed. Would have liked to hear on my follow up question but I understand your reasoning for not doing it.

Thank you for your help, really appreciate it.

Quote from: Jon66 on June 19, 2024, 12:35:55 PMIt isn't scaremongering its advice because the landlord forums are littered with people asking how to exit these contracts. It's going to be expensive. Not taking legal advice because you can't afford to says it all. You're a fool. Good luck.

Ok, Jon 66. The forums are also full of people having trouble evicting people on normal AST contracts. But what do I know?
Thanks for your constructive advice

Quote from: Tatiana on June 19, 2024, 02:19:03 PM

Quote from: Jon66 on June 19, 2024, 12:35:55 PMIt isn't scaremongering its advice because the landlord forums are littered with people asking how to exit these contracts. It's going to be expensive. Not taking legal advice because you can't afford to says it all. You're a fool. Good luck.

Ok, Jon 66. The forums are also full of people having trouble evicting people on normal AST contracts. But what do I know?
Thanks for your constructive advice

That's true, and some of those landlords have chanced breaking the rules only to discover it causes huge  and expensive costs further down the line. Some of those landlords were arrogant and thought they knew better than the law and went against prescribed practice. Some of them didn't understand the basic statutory/contractual laws in the market in which they were operating. Ring any bells?

Quote from: heavykarma on June 19, 2024, 12:07:21 PMWhat is a bit stupid is to have a load of battle- scarred veterans telling you the same thing, then get arsy because they are truthful with you.   

To be fair, some of the replies were a bit rude - it did trigger me and I overreacted. While getting your truth across is important, delivering it rudely is not really helpful.

Apologies to everyone who was genuinely trying to help for my overreaction.

I am still trying to learn things and my head is spinning - there is so much to know and understand even with a standard AST

Anyway, thanks everyone for your time and trying to help.

Don't be put off letting. Why not stick to something nice an vanilla - let the property to a couple of nice people.

You're right that forums are full of people having issues evicting people. But that's a self selecting sample, really.

I've was letting for many many years and never had to evict anyone (I've ended my business and everyone left when I asked them to). The key is selecting the right tenants. Then it's just about being a decent landlord.

No need to apologise.  No one is meaning to patronise you. You are right that plenty of problems can arise with standard lettings, so that is all the more reason not to stack the odds against you even more.

Contracts of all kinds are broken with impunity all the time. When push comes to shove only the very rich and those who have nothing to lose should get into litigation. Agonising over the wording of a contract is not the most important thing. What matters is the moment when you hand over those keys. There have been posts over the years from landlords who are homeless themselves and potentially bankrupt, trying to get their property back.

As I mentioned before,  what control will you have over the type of people residing there?  I do wish you luck,and hope you will not be scared to come back with questions, as long as you don' t expect anyone to encourage you to do something plain daft.  x

Quote from: Tatiana on June 20, 2024, 03:05:49 PM

Quote from: heavykarma on June 19, 2024, 12:07:21 PMWhat is a bit stupid is to have a load of battle- scarred veterans telling you the same thing, then get arsy because they are truthful with you.   

To be fair, some of the replies were a bit rude - it did trigger me and I overreacted. While getting your truth across is important, delivering it rudely is not really helpful.

Apologies to everyone who was genuinely trying to help for my overreaction.

I am still trying to learn things and my head is spinning - there is so much to know and understand even with a standard AST

Anyway, thanks everyone for your time and trying to help.

I wasn't trying to be rude, apologies for being abrupt. It's frustrating when you can see a disaster in the making.