How do Guaranteed Rent Schemes Work?
Letting your property can be a challenging process, there are a huge range of circumstances that can affect your actual profit, for example, safety certification, repairs and maintenance and void months in between tenancies. Sometimes you may end up with less than you planned for, this is why a guaranteed rent scheme can be beneficial.
Guaranteed Rent: The Basics
Guaranteed rent, sometimes also known as rent to rent, is where a company takes an interest in a property for a period of time, and agrees to take responsibility for paying the rent to the landlord, essentially then becoming ‘the renter’. In return, the landlord gives permission for the third party, usually a letting agent, to rent the property to other tenants.
Why Would Landlords Choose Guaranteed Rent?
Guaranteed rent offers many benefits to the landlord, the main benefit is that the rental income is guaranteed, regardless of whether there are tenants in the property or not. On top of this, the ‘renter’ (or the third party) generally also takes care of any damage to the property, as it is their responsibility to return the property in the same condition as when they took it, so the landlord does not need to worry about maintenance checks or repairs.
Furthermore, the landlord would not incur any letting, management or renewal fees, as the ‘renter’ is expected to deal with these themselves, saving the landlord time and money. The landlord is also able to request a guaranteed rent contract for anything between 1-5 years. This provides added security for the landlord and means they can budget for the long term.
What are the Benefits to the Renter?
Once the ‘renter’ takes lease of the property, they effectively become the landlord. This gives them the opportunity to find tenants for the property, and then they get to keep whatever rent the tenants pay. They generally allow more flexible arrangements with the tenants, for example, they may rent out individual rooms of a multi room property.
What Legal Issues Should be Considered?
The guaranteed rent scheme agreement between the landlord and the renter is of a commercial nature, so they should enter into a lease of the property, for the specified period of time. The contract should have clear, unambiguous terms of business, so each party knows where they stand and what their responsibilities are.
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