Date Published 14 March 2013
A growing number of Landlords are falling for a 'Guaranteed Rent' scam operated by letting agents and even some other landlords.
This is how it works:-
1) Landlords see or hear an advert offering guaranteed rent whether the property is let or not and whether or not a tenant pays on the due date. Seems like a compelling offer doesn't it?
2) The person selling the contract explains that they will need up to a month to let the property and as soon as the first tenant moves in the landlord will be paid his rent on the same day of the month for at least 12 months whether the tenant pays or not and even if they move out.
3) The landlord is asked to sign an agreement allowing the property to be sublet.
4) The rent offered to the landlord is below the normal market rental value, which under the circumstances might appear to be reasonable. After all, everybody needs to make a profit somewhere don't they?
5) What the landlord does not usually realise is that their property could be rented to asylum seekers, large families claiming benefits or even sharers. At the end of the contract landlords are responsible for putting right any damage and we have seen examples of where this has been more than they have received in rent! Furthermore, subletting to such groups of people may well be in breach of buy to let mortgage conditions and could result in mortgage companies insisting that loans are repaid.
6) In the case of landlords offering this scheme there is of course zero protection, particularly if they are operating as a limited company. If they get into difficulty they simply stop paying the landlord who is then left to pick up the pieces. There is no point liquidating the company as it will never have any assets. Even Nationally franchised letting agents operating Guaranteed Rent schemes seem to offer little more protection. The franchisor rarely carries any responsibility for the actions of it's franchisees who sign landlords up on Guaranteed Rent. The only real risk to the franchisors in the event of a franchisee failing is that of a tarnished reputation.
The Guaranteed Rent scheme is fraught with risks which all point back to landlords, hence our words of caution if you are looking into them. Bergason only place A grade tenants in your property and can offer Rent warranty policies that are backed by vigorous underwriting to cover you for non payment or rent and £25,000 of legal cover usually free of charge. Call today to find out more on 0121 384 1333