UK Landlord Forum / Life

My sister and I were in the process of inheriting some rental properties belonging to our late father, one of the properties was empty and had been refurbished, we tried to have it let by a local well known estate agency, but there were complications due to not having been finalised as part of the estate, so I advertised it on Facebook and got a tenant within a week.
My sister decided that she wanted two months rent in advance instead of a deposit, as this is what she had with another rental property she owned.
I have a feeling this will bite us in the rear department, as the tenant has turned the property into a pigsty and become a nuisance to other tenants, smoking cannabis and cigarettes that is entering the property above.
I have read that we cannot use this rent deposit for damages, and may be leaving ourselves open to prosecution if we try to evict if we cannot come to some sort of agreement of how he manages the flat.

There are a number of issues.

If by "advance rent" you simply asked the tenant to pay some months rent in advance, that's just advance rent. If you actually took two month's worth of rent in money and are keeping it in case something goes wrong in future, that's not rent, it's a deposit (regardless of what you've called it) and that's not legal. It's more than you're allowed to take as a deposit and it needs to be protected and administered like any other deposit.

If you haven't done that your tenant can claim their deposit back and also a penalty of up to three times the value of the deposit taken. They're more likely to use a legal firm to make a claim, as that will cost you more in legal fees (as that's cheaper than actually going to court).

You also can't use a section 21 notice unless you return the deposit to the tenant first.

The second problem with taking advance rent as a deposit is that it signals to the tenant that you either don't know what you're doing or are a dodgy landlord. Which can attract the wrong type of tenant, or it can enable the tenant's poor behaviour as they are in a position of power over the landlord.

There are also issues with letting properties that are part of the estate of a deceased person (which is probably why the agent felt things were complicated). Depending on who the executors are (if there's a will) and what's happening to the income (and who's paying the tax) it's very easy to accidentally commit quite a serious fraud.

Quote from: jpkeates on June 20, 2024, 10:59:11 AMThere are a number of issues.

If by "advance rent" you simply asked the tenant to pay some months rent in advance, that's just advance rent. If you actually took two month's worth of rent in money and are keeping it in case something goes wrong in future, that's not rent, it's a deposit (regardless of what you've called it) and that's not legal. It's more than you're allowed to take as a deposit and it needs to be protected and administered like any other deposit.

If you haven't done that your tenant can claim their deposit back and also a penalty of up to three times the value of the deposit taken. They're more likely to use a legal firm to make a claim, as that will cost you more in legal fees (as that's cheaper than actually going to court).

You also can't use a section 21 notice unless you return the deposit to the tenant first.

The second problem with taking advance rent as a deposit is that it signals to the tenant that you either don't know what you're doing or are a dodgy landlord. Which can attract the wrong type of tenant, or it can enable the tenant's poor behaviour as they are in a position of power over the landlord.

There are also issues with letting properties that are part of the estate of a deceased person (which is probably why the agent felt things were complicated). Depending on who the executors are (if there's a will) and what's happening to the income (and who's paying the tax) it's very easy to accidentally commit quite a serious fraud.

We are the executors and all income was declared, the advanced rent was paid up front, and the next payment was due a month later so in theory only a months rent was being held so less than a deposit.

The issue for executors is that you have a duty to maximise the value of the estate, so the rental income should belong to the estate until it can be distributed. If you and your sister are the only beneficiaries, that's unlikely to be an issue (as no one else can really be impacted). But it's worth while keeping that in mind (more for the benefit of anyone else reading this stuff).

Unless the advance month's rent was assigned to a specific month (not the last month, but the 12th month or something like that) it's  almost certainly a deposit, and all the things necessary for a deposit need to be done to avoid a claim being possible and to serve a valid section 21 notice.

Quote from: jpkeates on June 20, 2024, 11:57:00 AMThe issue for executors is that you have a duty to maximise the value of the estate, so the rental income should belong to the estate until it can be distributed. If you and your sister are the only beneficiaries, that's unlikely to be an issue (as no one else can really be impacted). But it's worth while keeping that in mind (more for the benefit of anyone else reading this stuff).

Unless the advance month's rent was assigned to a specific month (not the last month, but the 12th month or something like that) it's  almost certainly a deposit, and all the things necessary for a deposit need to be done to avoid a claim being possible and to serve a valid section 21 notice.

The tenant has been in the property for six months now, and the money was taken as advanced rent with nothing assigned as to dates just a verbal agreement, as things stand the tenant is having financial difficulties, and may not be able to pay the next months rent, if we allowed him to use the advanced rent would that remove that problem.

I think this is all on your sister, who - to be frank - isn't reflected by you as being the sharpest tool in the box. Whenever anyone tries the "advance rent that isn't a Deposit" angle... it's easily seen for what it really is. It's an attempt at circumventing the Deposit legislation that has been in effect for well over a decade now. That, in itself, may not be related to the Deposit itself, but just a wider attempt to avoid having anything documented anywhere.]

Deposits might be a bit of a pain in the backside, but they exist for a reason - overall they're supposed to be helpful to the Landlord and the Tenant. If you intend to keep the inherited properties as rental stock, then please start to do things by the book... sure, you can find your own Tenants on Facebook or in a corner shop window... but once you exit the standard path you're well into the realm of dodginess. Next step - slum Landlord.

I have no doubt you'd be horrified by that notion, please educate yourself and take the necessary measures. It could be a painful, and expensive, experience with the current Tenant you refer to.

Quote from: fellsidepropertiesThe tenant has been in the property for six months now, and the money was taken as advanced rent with nothing assigned as to dates just a verbal agreement, as things stand the tenant is having financial difficulties, and may not be able to pay the next months rent, if we allowed him to use the advanced rent would that remove that problem.

Yes, using the deposit as rent (as long as the tenant suggests that or agrees to you suggesting it) returns the deposit to the tenant.
Your sister should probably look to sort out her other tenancy. Making claims is so common nowadays that it's basically a whole little industry.

Quote from: Hippogriff on June 20, 2024, 12:13:51 PMI think this is all on your sister, who - to be frank - isn't reflected by you as being the sharpest tool in the box. Whenever anyone tries the "advance rent that isn't a Deposit" angle... it's easily seen for what it really is. It's an attempt at circumventing the Deposit legislation that has been in effect for well over a decade now. That, in itself, may not be related to the Deposit itself, but just a wider attempt to avoid having anything documented anywhere.]

Deposits might be a bit of a pain in the backside, but they exist for a reason - overall they're supposed to be helpful to the Landlord and the Tenant. If you intend to keep the inherited properties as rental stock, then please start to do things by the book... sure, you can find your own Tenants on Facebook or in a corner shop window... but once you exit the standard path you're well into the realm of dodginess. Next step - slum Landlord.

I have no doubt you'd be horrified by that notion, please educate yourself and take the necessary measures. It could be a painful, and expensive, experience with the current Tenant you refer to.

I appreciate yours and others advice and honesty, and will admit to a certain amount of ignorance and naivety, and can now see we have left ourselves in a vulnerable position with this tenant.
We are both new to the letting game and have a lot to learn about the legal side of things, on a brighter note we do have six other happy tenants in well maintained properties that actually love where they live and are quite happy to keep their homes clean and tidy.

The thing is... a Landlord shouldn't really concern themselves with a Tenant's lifestyle - as such. The property is to be considered their home, until the time it isn't. And whether they keep it "clean and tidy", or not, is an issue for them.

Even them causing a nuisance to a neighbour, it's not really on you. In fact, my doctrine is that only bad can come from a Landlord being aware or involved in issues between neighbours - resist the urge to consider yourself in any kind of elevated position - they are just adults, adulting.

As a Landlord your concerns need to be... have you completed your legal obligations, is the property well-maintained (by you and the Tenant) and is the Tenant paying their rent.

Living messily isn't a crime, yet, nor should it affect the structure of your rented property (of course, we can take it to the extremes to prove a point, anyone can)... but if a Tenant lives like a slob, that you can't even imagine, but hands the property back to you in the same state (minus fair wear-and-tear) at the end of the tenancy... well, that's how it works.

Good luck!

E&OE.

I agree that it is the tenant' s home and how they live is their business.  I have found however that people who do live like slobs are not inclined to leave the place immaculate when they leave. The damage done can often be more than is covered by the deposit. 

It is not just USING the advance rent for damages, If you took that two months rent on January 1st 2024, then asked the tenant to make the next rent before March 1st 2024 then you risk the advance rent being deemed as a deposit held for the performance of the contract.

If it looks like a duck and it quacks like a duck it is deemed to be a duck.

If you have been doing this I suggest you return any overpayment of rent as this is a way a Tenant can make it appear as a deposit.

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Quote from: fellsideproperties on June 20, 2024, 10:24:12 AMMy sister and I were in the process of inheriting some rental properties belonging to our late father, one of the properties was empty and had been refurbished, we tried to have it let by a local well known estate agency, but there were complications due to not having been finalised as part of the estate, so I advertised it on Facebook and got a tenant within a week.
My sister decided that she wanted two months rent in advance instead of a deposit, as this is what she had with another rental property she owned.
I have a feeling this will bite us in the rear department, as the tenant has turned the property into a pigsty and become a nuisance to other tenants, smoking cannabis and cigarettes that is entering the property above.
I have read that we cannot use this rent deposit for damages, and may be leaving ourselves open to prosecution if we try to evict if we cannot come to some sort of agreement of how he manages the flat.