GUARANTEED RENT- Simplified
Guaranteed rent is when an individual or company such as a letting agent takes on the management of a landlords property, paying a fixed monthly income to the landlord over a definite period, guaranteeing the income.
During this period, the letting agent is responsible for renting and managing the property to other parties as well as paying the landlord the agreed rent.
How does it work/How is it guaranteed?
Letting agents guarantee their rent payments either through an insurance policy or through their own guarantee and some agents like Lint Group have their rent backed by Local Government.
When the agent is backed by an insurance policy, as with most insurance policies there is the risk the insurance company may not pay under their terms and conditions so this is not really guaranteed rent.
Some agencies guarantee rent payments by paying low rates to landlords and charging very high rents to tenants with no insurance or backing from local Government, however during the Covid-19 lockdown some of these agents have stopped paying their landlords the full rent or have reduced the rent as they have not been able to sustain this type of guaranteed rent when the tenant hasn’t been able to pay.
Also, if these agents were to go into liquidation the landlords rent would not be paid therefore the rent is not truly guaranteed.
The benefit with our Guranteed rent is if ever Lint Group were to go into administration or if the property was empty or if the tenant stopped paying, then the local authority would continue to pay rent to the landlord and this insures that your rental income is fully guaranteed regardless of the circumstances. Having been around for almost 30 years Lint Group have ensured that their landlords properties are in safe hands and fully guaranteed with their payments regardless of what happens.
WHAT IS INCLUDED IN GUARANTEED RENT?
Guaranteed rent options can vary in their offer, it is advisable to ensure that there are no other additional costs involved. See image below of an example of what should be included:
WHY SHOULD I CONSIDER GUARANTEED RENT?
The letting agent would be responsible to pay the landlord’s rent, regardless of the property being used or not. This is particularly important during these difficult times when tenants are finding themselves out of work, furloughed or unable to work especially during the Coronavirus Pandemic. The government has launched an emergency temporary legislation ensuring tenants are given ‘no less than three months’ notice, compared to the previous notice of rental arrears being two weeks. There is also a provision within the new legislation allowing the government to extend this three-month notice period to six months should the government wish to do so to protect tenants’ rights.
If you are a landlord and have a tenant struggling to pay their rent during the pandemic period, it is important to communicate that they would still be liable for the outstanding rent. The landlord and tenant need to agree on how they can pay any arrears that have incurred. If there was a breach on a payment plan following agreed terms, the Landlord can consider to seek possession of the property legally through the eviction process.
A reputable letting agent can handle all tenancy issues for their Landlords with Guaranteed Rent, irrespective of any market change and continue to ensure the rent is paid on time, throughout the term of the lease and until vacant possession of the property.
Short-term rentals also put a lot of landlords off due to the fear of having an empty property. Vacant properties do not bring in any income, and if there are long gaps between tenancies, or if they only rent for a short period of time, landlords could potentially see their profits begin to decline. Guaranteed rental can certainly take away the extra hassel from the landlord and giving them peace of mind. It is the agents duty to take care of any damage to the property as it is their responsibility to return the property back to the landlord in the same condition as when they took it subject to wear and tear. A letting agent would be expected to comply with all the laws and compliance issues that the landlord would generally deal with, saving the landlord time and money.
WHAT DOES THE LETTING AGENCY GET FROM THIS?
Guaranteed rent is calculated in many ways. The letting agent takes in to consideration the location, the number of bedrooms, the size of the property and the decorative condition of the property, once this is clear a true calculation of the rental value of the property can be made.
The value paid is normally less than the open market as this should balance out with the additional costs of renting out without guaranteed rent. Additional costs include tenants finders fee, inventory cost, empty periods, damages, rent arrears and legal costs for eviction if required.
WHAT TO LOOK FOR WHEN CHOOSING A LETTING AGENT?
An established local agent is probably your best bet, however it is advisable to consider a letting agent who is has the capability to manage important long-term financial and legal matters. Looking at the longer term value in the service provided is key when onboarding the right letting agent.
All Property Agents that carry out Estate, Lettings and Property Management Work, as defined by legislation, must join a government authorised consumer redress scheme, such as the Property Redress Scheme (PRS).
*Lint Groups accreditations
As both the landlords and tenants are consumers and the agent is offering a service to both parties, If there is a dispute as to the terms or the services provided then the consumers can escalate the concerns to an independent body. The Agent is providing the consumers with the peace of mind that they will deal with letting and managing the property correctly and professionally.
The PRS even suggest performing thorough due diligence on any letting agency offering guaranteed rent services by checking over their credit and financial history at Companies House. In the event of the letting agency running into administration, complications may arise where they forfeit on debt and are not legally obliged to pay, even if it is guaranteed rent. Similarly, any fines imposed resulting from breach of regulations (such as the new HMO changes) are ultimately payable by the landlord, unless otherwise agreed.
Letting agencies with the London Landlord Accreditation Scheme (LLAS). show that they comply with a code of conduct and that management fulfil the fit and proper person requirement. LLAS is a partnership of London boroughs, landlord organisations and educational organisations to recognise good practice and improve conditions in the private rented sector.
A client money protection scheme ensures that In the extremely rare event of a fraud, the landlord and tenant will be reimbursed for any loss. All landlord and tenant money should be held in a Client Account, separate from the letting agent’s general bank account.
By law, tenancy deposits must be registered with a government approved tenancy deposit scheme and an agent should be able to provide confirmation that the deposit has been registered.
There are a number of pieces of legislation in place to protect the safety of tenants and the legal responsibility remains with the landlord, so consider whether the letting agency will provide a reliable and trusted repairs and maintenance services in-house covered by CHAS, NICEIC and is on the Gas Safety register accreditation which ensures the safety and competence of their employees.
Additionally, to be a local government provider of property, an organisation has to go through a vigorous and thorough process. The local authority looks thoroughly into the firms accreditations, it’s accounting processes, their complaints procedures and its staff turnover before working with the property provider. So being a provider to local authority should reassure the landlord that their property is in safe hands.
Guaranteed rent may not be for everyone, if you find that you would rather invest your spare time persuening your business, family, your career and prefer the experts to manange the entire process or if you are new to being a landlord and want some professional asssitance, then guaranteed rent is probably the best solution.
Our teams have been inundated with calls during this period, here is a recent feedback from a landlord who rents out part of thier portfolio with Lint Group and the rest with other letting agents. They shared their experience on how they have been impacted during the pandemic, realising the importance of guaranteed rent with Lint Group.
Get in touch with our friendly sales team who are ready to guide you through the process. Get in touch on 02 08554 9999.