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Hoping for some advice – I have tenants who did not pass the credit checks. They have been in the property for 6 months and have signed up for a 12 month contract.
I would like to take out landlord rental protection insurance but as the tenant failed the credits checks, this is not possible.
As a work around, I was thinking of converting the deposit to advanced rent. The deposit is 2 months
So if I was to take that as rent it would effectively mean their monthly rent going forward would be substantially less, it would be reduced enough for them to pass the credit checks.
I would effectively terminate their current contract and issue them with a new contract of 6 months for the remaining term.
Does anyone know if it is possible to do this?
It is possible but you need to be very careful and get all the correct paperwork in place. Have a look at https://www.landlordlawblog.co.uk/2010/08...-payments/
Very interesting. It does look to be a bit of a mine field.
It is not immediately clear what problem you are trying to solve. If the tenants are paying their rent then you have no real problem and I would question why you need rental protection insurance. If the tenants are owing you then you need to find some solution but you're too late for rental protection.
You cannot unilaterally change the terms of the tenancy. Any changes will need to be agreed with the tenant and must be properly documented. The tenant may be wary that you are trying to weaken their position, even though it sounds like you are not. Termination of the existing agreement would need to be agreed and a new tenancy entered into. This is possible and there tenant would no doubt agree if their rent was lower, of course you would need to recover the deposit and make sure that this, in particular, is clear in your documents.
As for the rental insurance, I have no experience as have never found it to be beneficial for either my own properties or those of my clients. However, just be careful that your actions do not void any policy; if you are moving the goalposts to obtain the insurance then there is a possibility that the insurer would not pay out
Thank you Graham, the agreement will be a professional document.
I am going to do some research on the rental insurance. From what I heard, it is worthwhile having but I am busy weighing up the pros and cons.
Don't sign 12 month contacts: 6 months - quicker eviction if problems, more incentive for tenant to comply with contract
Thanks, never thought about it that way. I guess a contract can easily be renewed, free of cost and no point forcing a tenant to stay if they dont want to.
This is pretty risky stuff. The case on advance rent (Johnson v olds) is pretty fact specific and not all advance rent arrangements will fall into it.
Agreed, I think I need to put some thought into this one as the conversion of deposit sounds like more trouble than it is worth after reading the comments.
They paid a deposit so it's a deposit:You can rename it "angel dust" or "brex*t bonus" but it will still be a deposit.