A new law could stop landlords from demanding several months’ rent up-front payments from new tenants.
A proposal, which would make it unlawful for a landlord to request or accept more than a month’s rent in advance, has unsurprisingly been welcomed by campaigners – but not proved popular with agents and landlords.
The Renters’ Reform Coalition has condemned what it describes as “extortionate” upfront costs traditionally required from renters prior to taking on a new lease, saying this has discriminated against less wealthy tenants.
But the National Residential Landlords Association (NRLA) is among those to voiced concerns that such restrictions could pose a risk to landlords if tenants cannot show other means of ensuring they can pay rent regularly.
Tom Darling, director of the Renters’ Reform Coalition, said: “For too long, extortionate rent-in-advance demands have allowed landlords to discriminate against poorer renters – it’s great the Government have acted on this and listened to renter groups by setting out clearly that this practice will be prohibited.”
Responding, Chris Norris, policy director for the NRLA, commented: “Restricting rent in advance, combined with freezing housing benefit rates and not enough rental housing to meet demand is creating significant barriers for those with poor or no credit histories needing to access the sector. This includes international students and those employed on a short-term or variable basis with an income that fluctuates.
“The government is cutting off any assurance responsible landlords might seek when renting to those who cannot easily prove their ability to sustain tenancies and pay their rents. In the end those who will suffer most are those the Government most wants to help.
“Ministers must provide clarity on how tenants unable to easily demonstrate their ability to afford and sustain their tenancies should do so. Expecting landlords to take on high levels of risk without practical assurances is not a sustainable solution and risks further exacerbating the challenges in an already constrained market.”
Also reflecting on the government’s plans to ban landlords from demanding several month’s rent in advance in the upcoming Renters’ Rights Bill, Timothy Douglas, head of policy and campaigns at Propertymark, said: “Whilst the UK government want to transform the experience of private renting, by banning the taking of rent in advance they are potentially reducing options for tenants to access private rented property.
“There are a wide range of circumstances and scenarios that impact how people pay their rent, for instance some renters are on fixed incomes, not all tenants pass referencing and affordability checks, and some have insecure incomes due to their work arrangements.
“The UK government must do more to understand why rent in advance is used by both landlords and tenants and avoid one size fits all policies that mean some tenants may no longer be able to access private rented property.”
Data from The Lettings Hub today reveals that 15% of tenants paying the highest rental amounts – £5,000 and above – rely on paying rent in advance. It is likely that this trend is driven by overseas students, where the tenant may be unable to secure a UK-based guarantor. Additionally, self-employed tenants with fluctuating incomes often use advance payments to demonstrate their financial reliability and secure a home.
Meanwhile, just 6% of tenants paying £1,000 or less per month in rent choose to make their rental payments in advance. The revelation suggests, therefore, that this is not a widespread practice which is being forced upon tenants. Instead, it appears to be valuable option used by a minority to secure a property which is suitable for their unique circumstances.
Across all rental price bands, just 7% of tenancies begin with an upfront rental payment of more than four months’ rent. This figure has not changed significantly in the three years that The Lettings Hub has been tracking the data.
Heidi Shackell, CEO of The Lettings Hub, commented: “The government must not underestimate the potential impact to tenants if rent in advance is banned. As can be seen in the data, the majority of tenants do not use this option, but for those who do, it could be the difference between securing a home or being excluded from the private rental sector altogether. We urge those on the committee making these vital decisions to study the data to ensure this option remains for tenants who benefit from this practice.”
The Renters’ Rights Bill will return to the House of Commons for its Report Stage and Third Reading in the House of Commons on 14th January, before moving to the House of Lords for further scrutiny.
The Lettings Hub is urging MPs on the committee in these final days before the bill returns, to carefully consider the implications of banning rent in advance without proper clarification. While it is important to prevent any exploitative practices taking place in the sector, an all-out ban of advance rental payments could lead to people who rely on this option being prevented from renting a home, The Lettings Hub argues.
So no renting to overseas tenants then and therefore close investment from the outside world.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Yep! No renting to those who wouldn’t pass the financial checks but have savings, and are more than happy to pay upfront.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
The Renters Reform Coalition need to have ‘both eyes open’ and not just one focussed on their narrow minded view. They clearly choose not to understand the wider implications of this.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
So unless landlords take the ‘everything will be fine’ pill overseas students without a UK guarantor, professionals who earn less than the affordability rating or those with a poor credit rating won’t be able to rent anywhere.
I can’t see this causing any problems at all.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
I use it for people who have CCJ’s that are (usually) from a bad relationship and have money behind them but don’t have someone who can be a guarantor. I’ve had people who have family members willing to pay 6 months rent upfront, but are either unable or unwilling to sign on as a guarantor indefinitely. Let’s face it, its the same basic principle as paying your car insurance in one payment or over a year. You’ll still have to pay it, so find the one that works best for you!
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Not to mention, the real reason many landlords take rent in advance is to disguise it as an unprotected deposit. While the new Renters’ Reform Bill may become law, it highlights the flaws in the system, as the Tenant Fee Ban has made little to no difference in curbing the practices of unscrupulous landlords and agents.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
How would it be disguised? If the rent is £500, then 6 months rent is £3,000 and the rent is due again 6 months later and this would be stated in the tenancy agreement, so there is not really any way of hiding it?
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Not all agents or landlords follow the same practices. Some require rent in advance, treating it like a deposit, while still collecting monthly rent starting from the first month. In your example, taking six months’ rent upfront from a potentially high-risk tenant is simply kicking the can down the road..
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
And those are landlords/agents that the PRS can do without, in my opinion. Rent taken in advance is exactly that. Rent paid in advance for a specific time of the tenancy term. Not money held in case they don’t pay one month.
And yes, it is taking a risk, but the general idea is that they can use that 6 months to get their finances in order to either have money saved to pay another 6 months, or to pay every month. And sometimes, people need a helping hand in a sticky spot, but the risks are too high for most Landlords without a safety net. It used to be a larger deposit, but we can’t do that now.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
My understanding is that is you take six months rent and charge another six months rent in six months, that is legal under current legislation. However if you take six months rent and then ask for monthly rent from rent two, then five months of that money MUST be registered as a deposit or the landlord/agent faces the consequences of repayment etc.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
The irony of all this could be that, if the end of fixed term tenancies happen, a tenancies is only ever as long as two months, based on the notice period required by tenants, so advanced rent of two months might be the max? Just a thought……
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register