Tenant offering to pay 6 months rent up front

Hi Sue

What was the reason given by your prospective tenant for wanting to pay 6 months rent up front?

Unless you are using a very good agent this can cause problems if they don't set up the tenancy agreement properly. Another concern is that Cannabis farmers often make such offers. I'm not saying that's the case here but you can never be too careful.

Will your letting agent reference the tenants to the extent that Rent Guarantee Insurance would be offered? That's my one of my main criteria for acceptance these days. The following tips from the National-Lettings website might also prove useful in terms of helping you to make a decision. The website is run by my brother who manages the property portfolio of my entire family, hence if you are a regular Property118 readers you will recognise many of the strategies as mine, see >>> http://lettingagentsonline.co.uk/free-guide-to-finding-perfect-tenants/

If everything checks out and you are confident that your letting agent is sufficiently experienced to get the contractual side of the arrangement right then go for it. However, be careful, make sure you see evidence of referencing to RGI acceptance standards and also make sure that your letting agent has OProfessional Indemnity Insurance just in case they do make a mess of the contract and land you with problems further down the line.

I hope that helps 🙂
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Reply to the comment left by "Mark Alexander" at "10/01/2014 - 12:12":

I know I come from the rough end of the spectrum and this does influence my advice but just be advised that 6 months rent up front is a classic sign that a letting ends up being used as a cannabis factory.

No rent issues means no reason for the landlord to come a calling.

I'm not saying that is what is going on here but bear in mind it is very common. Around 10 cannabis factories a week are disconnected in my borough alone and they always start with 6 month's rent up front.

I have accepted tenants with 6 months rent up-front on a couple of occasions with no problems. I think the key is to find out why they are suggesting paying in advance.
In my case it has been due to a marital split, where the tenant has the funds available from the split ( ie here's £££ please leave) as long as they pass the standard references and the agent does check the property a couple of times during the first 6 months then all should be fine. In my case it has worked well, and I get the bonus of 6 months rent on my bank account too.
So,
1.Why
2.References
3. double check their current accomodation & reasons for leaving with the current landlord.

I don’t like 6 months’ rent up front, because what happens at the end of the 6 months…. I would much rather take a very large deposit and/or a home owning guarantor.

There are 101 reasons for someone having a poor credit rating, but having lots of money. E.g. I brought a property last year, the vendor was moving into a smaller rental house. She has a low income from her pension, but would have lots of money in the bank on the day she moved in.

When I split from my wife I offered to pay 6 months rent in advance, because I needed to claim Housing Benefit and as I was part-time self-employed I knew it would take the Council many months to sort out the claim (it took 9 months in total, as they made errors which I had to appeal). Thankfully the landlord (and agent) accepted the 6 months up-front and I remained there for about 5 years (until landlady decided to sell it). Thus, there are a million and one reasons why someone may wish to pay 6 months in advance, so don't pre-judge, just consider all the possibilities. - I'm now a landlord with multiple properties, and I would very much like it if my tenants were willing and able to pay 6 months in advance, but as has already been stated, be careful and check that the house is being used correctly, i.e. not as a cannabis factory.

Reply to the comment left by "Ian Ringrose" at "10/01/2014 - 13:06":

I too would prefer a guarantee from a working home-owner, especially if they pass referencing and RGI is offered. If people say they can't find a guarantor that gives me a good idea of the socio-economic background of their friends and family which tells it's own story. It can be a a quip response though because people are often embarrassed to ask friends and family to help so I do gig a bit deeper. Think about it, if one of your friends or family asked you to be their guarantor and offered to give you 6 months rent as a gesture of good faith you would probably be far more inclined to agree to help them wouldn't you? I think most people would. Therefore, that's what I suggest to any tenants offering 6 months in advance.

Also remember that more than two months deposit gives the tenant the right to sublet without consent.

If the tenancy agreement isn't correctly drafted you might need to give 12 months notice on a section 21 and if the tenant also pays monthly as well as paying 6 months up front then the payment will be treated as a deposit as opposed to rent in advance and must be protected accordingly.

In short, it can be a bit of a legal minefield.
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As people have said there can be various reasons for paying 6 months rent up front but my main concern is the 7th month payment, as people by now have got used to not having to pay rent and haven't allowed for the following months...
To keep it simple ... Take two months rent as deposit and have them pay as normal..Therefore if any problems arise you have justification to take from deposit.. If your agent does his inspection he should be aware of a Cannabis factory quickly and notify the police

I think it is more the case of,

If the people trying to setup the Cannabis factory believe
it is very likely to be spotted on an inspection and the
police informed before the first harvest they will find a
different property.

So explaining about inspections at and before a viewing maybe more important that the inspections themselves…..

I was offered six months rent up front a couple of times to help address credit history problems. In one of the cases, the tenant never paid a penny after the end of the first six months of the tenancy and in the end we had to evict them. I found out later that the tenant had taken a log book loan to pay the six months rent.

So I completely agree with the comments others have made about referencing and guarantors.

In my case I would probably still have gone ahead, but what I should have done was served a section 21 notice to expire at the end of the fixed term of the tenancy. In the event it took me 5 months more to get them out.

To avoid the cannabis farm issue you can (and should anyway) do regular inspections.

I feel like the voice of doom and gloom here haha

I'm sure that there are a million reasons why a tenant would want or need to pay up front. My cannabis farm warning is just one angle and probably reflects more on where I live and work than anything else.

All I'm saying is I've never been involved in a cannabis farm when there hasnt been 6 month's rent up front, which is not the same as saying that 6 month's rent upfront means skullduggery.

A visit 6 - 8 weeks into the letting will sort it, plus liaise with EDF Revenue to see if there is any excess use of electricity. The last one I was involved in the tenants had an electricity key meter but were whacking on £80 a week.

Leaks to neighbouring properties are another sign as the automated watering systems dont work very well