Should you pay your rent upfront to save money?
Over the past year renting has become increasingly popular, as many people have struggled to get a mortgage and buy a home, making the option of renting far more appealing. Also, difficulties that sellers have had in selling their properties in the current financial climate has resulted in an increase in the number of properties coming up for rent, which has resulted in increased choice and better value for money for many consumers.
Of course, those renting a property want to try and get the best deal possible in terms of their rent, and there are some landlords that offer a discount to tenants that pay their rent in advance by six or twelve months. The discount can be quite significant, so it is not surprising that some people are tempted to pay upfront for the specified period. However, some industry officials have warned that doing this could create problems for some tenants.
One of the main problems is that over the last three months the number of landlords that have fallen into arrears with their mortgage has gone up by 50 percent, and like any other homeowner when the landlord falls into a certain level of arrears the bank starts repossession proceedings. This means that whilst you, as the tenant, may have paid your landlord six or twelve months worth of rent upfront in good faith, the landlord may actually end up losing the house through repossession, and you will already have handed over your hard earned cash.
One tenant explained how she had paid £48,000 upfront for a year’s rent in order to make a £6000 saving on the annual rent. However, she then found out that the landlord was thousands of pounds in arrears.
She said: ‘We are feeling very vulnerable. We had no idea when we rented the property that this could happen. We just assumed that everything was OK. We face losing all our money and our deposit, or having to go to court, should the lender want to repossess during our one-year tenancy.’
An industry expert from the Council of Mortgage Lenders said: ‘A bank or building society will eventually send a letter to ‘the occupier’ of a property. We advise tenants to open any letter addressed this way. The letter will give them a minimum of 14 days’ notice of any court hearing to repossess the house. If the court does repossess, they will have a further minimum 28 days before the lender takes possession. As soon as a tenant realises there is a problem, they should get advice from Citizens’ Advice or a solicitor, and make contact with their landlord’s lender.’
Tags: council of mortgage lenders, rent payments, landlords, Real property law, best deal, tenants, advance, CouncilA legal expert added: ‘If you have paid all the rent up front, then if the house is repossessed you need to put in a claim against the landlord for the outstanding rent and deposit. This would be paid out of any surplus once the property is sold. Tenants falling outside the assured shorthold tenancy rules should insist that the landlord has his lender’s consent and that any deposit is paid into an escrow account held by a solicitor or the letting agent. I would not advise clients to pay rent up front as a year is a long time and you don’t know what will happen.’
