Letting agents withholding rent paid in advance?

Reply to the comment left by Sharon Canning at 15/02/2024 - 14:39
This post has opened a can of worms.

If the agent has collected six months'; rent up front then that should be what is due under the agreement. the landlord is therefore entitled to the money. Compare this with a commercial lease where rent may be quarterly of half yearly - it's not up to the agent to decide when the landlord receives it.

If the agreement requires monthly payments, but the agent collects 6 months' rent up front, they are wrong!

If the landlord fails to pay the mortgage, thatr's not the agent's problem.

Graham I respectfully disagree. Any agent who takes up front monies, would discuss what it means during the proposal prior to being agreed and understood by all parties.
Also, if there are any maintenance issues during the term of the tenancy, this is normally taken out of the rent, with no rent in hand, this can cause problems.

With regards to your comment 'it is not the agent's problem' if the property is repossessed due to the mortgage not being paid - The poor tenant would heavily disagree as they have entrusted the future rent money with the agent.

Reply to the comment left by Sharon Canning at 15/02/2024 - 14:58
The issue of repairs costs is separate to holding rent and I quite agree, but the OP has said that the agent simply won't pass over the money Our system has a float account , so rent is siphoned off separately for repairs. This is not the same as withholding rent. Sometimes we hold an amount for strategic repairs (e.g. new boiler, or the like), but generally it's just enough to keep things ticking over. It is always agreed with the landlord as they are our client. Some prefer to pay for repairs themselves as they happen.

Whilst a tenant may be aggrieved if the landlord takes the cash and fails to do repairs, the agent is acting entirely for the landlord.

If in writing what you have stated has the requirement then you want paying has stated minus their fee .

Thanks for your various responses. To answer some of your questions and let you know the outcome: 1) why is the tenant paying up front - because this is their preference. 2) Propertymark state that this is a matter for the landlord and agent. 3) My agent has been bitten in the past by a landlord informing them 1 day before a repossession was to happen, so want to circumvent this - understandable. What did we agree. The agent has paid me the 6 months rent, less their fees and an amount equivalent to 5 months mortgage payments (which are about 1/7 of the rent), each month the equivalent of 1 months mortgage payment will be paid to me. This works for both of us. We are both happy. I realise that I could have insisted on all of it, but my cashflow is not that tight. In terms of tax implications, I suspect that under GAAP, it is not a matter of recognising the cash at the point of receipt but at the point in time that it relates to the service delivered. In a past business I sold annual licenses to software I had developed. I could not recognise the total receipt in the accounts at the point of payment as it left a liability on the balance sheet for the service yet to be delivered, instead the total was amortised and recognised in equal 12ths over the period it related to. I would argue this with HMRC if need be.

Reply to the comment left by Steve O'Dell at 16/02/2024 - 15:49
Concerning the tax position, it depends whether your accounts are prepared on the cash basis, which is now the default for property income up to, as far as I recall, £150k. The alternative is to elect to use the conventional basis where income and expenditure is accounted for on the date that it becomes due rather than when it is actually received or paid.

An agent has a fiduciary duty to act in the best interests of his principal i.e. the landlord and I cannot see any grounds on which it could be argued that retaining money properly due to the landlord is in the landlord's best interests. The agents suggesting otherwise are assuming that they have a duty to act in the best interests of the tenant, which is not so.

It is perfectly acceptable to have a tenancy agreement under which rent is due monthly with a side agreement that the tenant will pay x number of months rent in advance. Problems arise where an attempt is made to conceal what is to all intents and purposes a deposit by taking e.g. 3 months rent at the start with subsequent monthly payments from the second month onwards.

Be very careful, I had an agent that went bust without having transferred the tenant deposit, so I am now responsible for coming up with the deposit.

The same would apply to rent in advance, so make sure the agent is holding it on a client account.