Letting Agent Breached my Mortgage Terms and Conditions!

Hi Joe,

As this is a one off and not your fault and the agent probably didn't consider it would be a problem, I can't imagine any normal lender having a big issue with this. What is done is done.

However I would ask how payment was made and where the monies are.

I'm an agent and in the early days of our business we occasionally took 6 months up front if someone failed the credit check, on the basis "What could possibly go wrong?"

Of course we discovered that it was all very well for 6 months, after which we had an un-creditworthy tenant happily settled in the property with no intention of leaving (because nowhere else would have him) and it was pot luck whether we got the rent or not.

Nowadays we only do it in exceptional circumstances (and never simply because the tenant can't pass a credit check). We only do it with the full knowledge and permission of the landlord, and with the landlord's agreement that the rent will be held in our client account (which has appropriate Client Money Protection insurance) and drip fed monthly.

Why don't we pay it up front to the landlord? Well, I'd prefer to - we get no interest on our client account and therefore no financial benefit and paying it in one hit would save on admin costs.

Trouble is we had one landlord where the property was flooded and uninhabitable so the tenant legitimately left mid-term. We had a hell of a job getting the advance rent back off the landlord.

I concur with Neil's comments above though - you've acted in good faith and there's unlikely to be a major issue with your mortgage lender even if they found out.

As to whether the rent in advance is yours or not, arguably it isn't till it falls due. But, again concurring with Neil, you can legitimately ask where the money is and ask for sight of the agents CMP (Client Money Protection Insurance). No reputable agent would have a problem with that.

PS One more thing - its very easy to fall foul of deposit protection regs in these scenarios if the advance rent payment is deemed to be a "deposit".

Joe as a first step check your contract with the Agent. As they have acted against your instructions it would be reasonable to hold them liable for all the resulting consequences. As Steve has indicated it is not just the 6 months period to be considered. It also demonstrates why your mortgage provider sets it terms and conditions. On the positive side it may turn out ok. Often there are other considerations in a credit check. It is always a balance of risk factors.
Finally there is always the temptation not to disclose information to all your partners eg mortgage provider, insurance company. Think carefully. Insurance companies have carefully worded clauses on this type of thing.

The agent is not able to withhold the money unless the landlord has expressly agreed to it.
I can't see a landlord agreeing to it: The money has been paid to him and belongs to him. It is an unnecessary risk to let the agent keeps hold of it.

Regarding the mortgage's T&Cs, if this is a one off I doubt the lender would even find out.

Out of interest why would a lender specify that the maximum advance rent be 3 months.

Thank you all for your comments.
The agent has advised me today that the advance payment is held in the tenant's account and is paid from this to me monthly as rent. They assure me that it does not breach the mortgage T&Cs. I'm not so sure.

In reply to Adrian Jones. Others have asked the same question. I don't know the answer.

The mortgage provider is well known nationally on the High Street.

Reply to the comment left by "Joe Carter" at "17/11/2015 - 16:59":

Might be worth asking your lender to explain.

Can the tenant access his account?

Reply to the comment left by "Adrian Jones" at "17/11/2015 - 17:08":

I would do but I don't want to draw attention to the fact that I may be breaking their T&Cs. They always want you to identify yourself before they answer any questions.

Reply to the comment left by "Joe Carter" at "17/11/2015 - 16:59":

Perhaps the lender does not want to find itself with no rent for a long period after repossession or receivership because the landlord pocketed it all in advance.

> The agent has advised me today that the advance payment is held in the tenant’s account and is paid from this to me monthly as rent.

But this is not from them to decide! It is money paid to you, which you should get unless to expressly agree otherwise.

The problem we have had when passing over 6 months rent in advance is when it comes to repairs. Landlords are eager to part with any money after they have received all the money for six months.