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  • Buy-to-Let

    Higher Advance Rent Instead Of Deposit?

    Hello all, I am renting 6 rooms on individual contracts in a HMO, which will mean taking 6 sets of deposits and protecting them etc.

    A friend of mine does not take deposits, instead, he simply takes 8 weeks advance rent, as opposed to 4 weeks deposit & 4 weeks advance rent.

    Hence he is not involved in deposit protection laws and simply adjusts the advance when the tenant leaves.

    Is this a good idea?

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    If you are taking money with a view to refunding it then that is a deposit and it has to be treated accordingly.

    If the deal is pay 8 weeks rent, then in 8 weeks time pay 4 weeks rent and same thereafter, then that is just rent (advance or otherwise) and does not have to be treated as a deposit.

    The tenancy agreement should clearly set out the basis on which rent is payable and the landlord should only collect rent on that basis.

    I had one last year where a deposit was taken, but we took six months' rent in advance; the tenant then paid rent monthly for six months and no rent for the next six months.  At the end of the year they had paid 12 months' rent.  They then started the next year paying monthly; all this was set out in the tenancy agreement.  The rent was rent and the deposit was the deposit - no blurred lines.

    You and your friend need to be careful that this arrangement is not a sham.  The small amount of time registering a deposit will outweigh any final arguments and potential penalties for failing to protect the deposits.


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