Legal News

Eviction specialist company Landlord Action is warning landlords that if a guaranteed rent agreement goes wrong or a company offering the service folds, landlords may have problems getting their properties back from rental tenants.

Paul Shamplina of Landlord Action told The Telegraph that a guaranteed rent company which goes into liquidation may still be trading and in such cases a landlord may have to take court action to recover their property:

“The process varies depending on whether the company has gone into liquidation or administration,” said Mr Shamplina.

“In liquidation, the tenancy contract becomes void and the landlord can issue eviction proceedings against the subtenants.

“If the company goes into administration…then it is still trading and you might have to go to court to evict the subtenant. In turn, the subtenant might then claim for 'relief of forfeiture' if they want to stay in the property.

“The difficulty landlords have is they have no direct relationship with the subtenant,” he added.

Guaranteed rent arrangements offer landlords a deal under which a property is tenanted and managed by an intermediary company acting between the landlord and the tenant. The arrangement guarantees landlords continuous tenancies and a guaranteed rental return. The intermediary company takes its profit from the difference between the amount the landlord charges for rent and the amount the tenant pays to the intermediary. The intermediary usually also promises to cover the losses during any period when there is no tenancy for the property.

However, another problem with the arrangement can occur if the intermediary company takes rent from a rental tenant and does not pass this on to a landlord.

In this instance, a landlord may again have to take legal action to recover rental monies owed.

The arrangement was first used by Local Authorities and some guaranteed rent companies also rent out single rooms in properties on a rent-to-rent basis.

Housing experts warn that if the intermediary has insufficient funding to cover the arrangements, landlords could find that they have a tenanted property but no rental monies paid to them.

The co-founder of Property Tribes, Vanessa Warwick, says that guaranteed rent arrangements work if the intermediary company has a sound financial structure and the proper systems in place. Ms Warwick said:

“If a landlord wants to opt for a rent-to-rent or guaranteed rent service, they must understand the credentials of the guarantee: has the company a track record of running this scheme, what is their financial health?

“This can be ascertained free of charge from a site like DueDil.com. They should also look for an agent with an Ombudsman Service membership and one that has recognised client money protection in place.”

Duncan Lewis Housing Solicitors

Duncan Lewis is a leading firm of housing solicitors and can advise on issues such as Landlord and Tenant, disrepair of rental property, unlawful eviction and housing benefit.

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For expert advice on housing law contact Duncan Lewis solicitors on 020 7923 4020.