Premium Tenancies

Thank you so much for this Tessa and also for acknowledging the source of the discussion at the beginning of your article on your Landlord Law blog.

Note to all reading this comment. Tessa is is one of a kind, a qualified Solicitor practising within the Law Society Code of Conduct and a true specialist in Landlord and Tenant Law. Tessa freely shares information as a guest columnist here and across several other websites engaging with landlords, tenants and lettings professionals. When you pop over to her website check out the Premium Services. They will save you a fortune and cost less to subscribe to than most people pay to watch TV. The services include Tenancy generation wizards, a legal advice forum, documentation and a huge wiki of pretty much everything you will ever need to know about property law.

I offer the above testimonial in good faith, their is no commercial relationship between me or Property118 and Tessa or Landlord Law.

Thanks Mark, thats very sweet of you.  And yes we are friendly but not commercially connected.  We both try to serve the private rented sector in our different ways.  Both of them important. 

As Ben Reeve Lewis points out - the statutory references to the premium only relate to;

Schedule 2 Housing Act 1985 (Council/Housing Association Tenancies)
Section 115 Housing Act 1988 (Contractual Periodic Tenancies - which in practice to not exist)

So, unless I'm missing something, they do not exist for private tenancies, even if you take more than 2 months rent.

Is it worth the risk, as a tenant may get legal aid to try to prove they do exist.

So am I reading this right that your opinion is that a tenants rights don't change in any way if they are renting on an AST from a private landlords regardless of how much rent or deposit is being paid to a landlord?

 Interesting discussion.  I'm with Tessa on this, I can't find any subsequent amendments on this in the Housing Act.  Most of the landlords in our network are foregoing deposits and just going for a couple of months rent in advance, but there has been a lot of expense due to damage and other sundries at the end of tenancies.  I guess it's a judgement call on the landlord's part.

Thanks for joining in Madelana. What's your view on 6 months rent in advance? Is your opinion that that would constitute a Premium Tenancy?

As we all know, Cannabis Farmers love to entice unsuspecting landlords with such offerings. However, I've also come across scenario's where landlords have let to a very genuine, fully referenced, squeeky clean Mr & Mrs Perfect who have paid 6 months rent up front and then allowed their employees to occupy the property. Ever come across that? If so, are the tenants allowed to do that in your opinion? Some would say yes because the 6 months up front rent constitues a premium. Tessa's research suggests otherwise to me.

I like the theory of no deposit and two months rent up front. However, is the second months rent seen as a deposit? My view is that it would be. If it wasn't that would save a lot of hassle and costs of protecting deposits and render the deposit protection legislation pointless.

Mark
I am concerned that taking upfront rent instead of a deposit could be construed as trying to avoid Deposit Protection. 

We have taken upfront rent payments but have also taken a deposit amount which is registered as the deposit, leaving the upfront rent payments in our client account to be released to the landlord as and when they become due.

We have taken larger deposit amounts at the request of our landlords where they have previously had their fingers burnt with poor quality tenants (not supplied by us I hastened to add). We did not see this as an issue as long as the tenant agreed as we understood that the Premium Tenancy/sub letting issue did not relate to ASTs. 

We will continue to watch this discussion with great interest. 

Dave, Top Management Letting Agents for Northamptonshire

If you take a large sum as rent in advance, my view is that
this is not a deposit.  The essence of a
deposit is that it is held a security and might be paid back.  If a landlord takes six months rent in
advance (and the rent account shows the rent as paid for the following six
months) he is not going to give it back. So I don't see how this can be a
deposit.  (The situation may be different if it is the agent who holds the money if they fail to pass it over to the landlord at once).

There have been cases where landlords have taken a payment
as rent but have not offset it against the rent account immediately, where it
has been held to be a deposit.  For
example see this report on the Nearly Legal blog
http://nearlylegal.co.uk/blog/2009/02/its-not-a-deposit-honest/

But in that case it seems to be clear that if the landlord
had offset that money against the rent as soon as it had been received, it
would not have been deemed to be a deposit.

The problem with large up front rent payments is not, so far
as I can see, that they may turn out to be deposits, but that it may affect the
period of the statutory periodic tenancy that arises at the end of the fixed
term.

I discuss these issues in my blog post here
http://www.landlordlawblog.co.uk/2010/08/25/problem-with-advance-rent-payments/

Thanks for a very informative topic. As has been mentioned, the way of avoiding the chance of creating a premium tenancy would be to take x months rent in advance. I think this just goes to show that even genuine and honest landlords acting in good faith, could come unstuck because of little known laws and small print.