Every landlord knows that they need a tenancy agreement in place to rent their property, but occasionally a case comes up that highlights how essential the wording can be in order for the agreement to work as it should. Sharon Betton, landlord advisor with the Bolton Bond Board and author of The Landlord Good Management and Practice Guide noticed an interesting case that illustrates this perfectly.
Many landlords would feel delighted if a tenant offered to pay 6 months rent in advance. I always advise caution, because this is a strategy that has been used by cannabis farmers. I read about a case recently which did not involve cannabis farming, but was equally distressing for the landlord concerned.
A Mrs. Old accepted a tenancy from the landlords, Johnson and Ors. She paid 6 months rent in advance. All went well, until the landlords wanted re-possession of the property. At that point, Mrs. Old claimed that the 6 months she had paid was a deposit and as such, should have been protected. If this was the case, then the landlord could not use a section 21, giving the tenant much greater security, if she continued to pay the rent on time.
The Court ruled in favour of the landlords, but made it clear that this was based entirely on the wording of the tenancy agreement, which made clear reference to the payment of rent paid 6 months in advance and that it was the clear intention of both parties.
Had the tenancy agreement not made reference to the 6 months being rent in advance, had it referred to a monthly tenancy, even though she had paid 6 months in advance, the judgement may have gone against them.
This tenant thought she was being clever and protecting herself, by denying that the rent was paid in advance. Fortunately, the landlords, perhaps without suspecting any reason for it, had protected themselves by making sure the tenancy agreement had the full details of the financial arrangement they had made with the tenant.
A good reason to accept rent paid 6 months in advance? Perhaps. But an even better reason to make sure that the tenancy agreement does what it is supposed to – which is to protect both the tenants and you.
For advice on buy to let – Ask Sharon