It pays to check the small print. In this month’s column, Stephanie Robinson demonstrates how landlords can take steps to secure their income by signing up a guarantor or taking advance rent...
My tenant’s mother agreed to be his guarantor, but now she wants to be released from her liabilities.
The contract she signed requires her to remain a guarantor until the tenant moves out, but he is unwilling to do so as his mother is paying the rent arrears. What should I do?
Whilst your guarantor may have changed her mind, she entered into the agreement on the understanding that she adhered to its terms and is, therefore, bound to remain in her role until she is entitled to be released.
Furthermore, I assume you – and indeed the tenant – may be very reluctant to do anything to terminate the tenancy and guarantee agreement, as his mother is paying what is due and is providing an income stream.
In short, a guarantor cannot wriggle out of their obligations and will be liable for unpaid rent until their contractual liability comes to an end.
You should note that if the guarantee covered a fixed term, such as a one year period, the guarantor will not be liable for any arrears once it ends.
In these circumstances, should the occupant choose to stay at the property and the tenancy reverts to a statutory periodic contract, there is no further guarantee implied by law.
If your tenant’s mother refuses to honour her commitment and pay the arrears, you may be able to pursue her for the amount due under the terms of the guarantee. You would be required to demand the outstanding amount formally, by way of a written notice and then issue county court proceedings if no money was forthcoming.
If successful, you wouldobtain a judgement against the guarantor that you could enforce in a number of ways.
Does rent paid in advance have to be protected by a tenancy deposit scheme?
A landlord using an assured shorthold tenancy agreement must protect the bond through one of the authorised tenancy deposit schemes, operated by an approved administrator.
The legal definition of a deposit is any money held as security against the tenant’s failure to perform his obligations or to discharge any liability arising under, or in connection with, the tenancy.
If you do not protect the deposit properly, you will not be able to regain possession of your property using the accelerated procedure, detailed under section 21 of the Housing Act 1988.
You may also be required to pay money to the tenant or relevant person by way of a fine.
In a recent case, the court of appeal was asked to consider whether a payment made under an assured shorthold tenancy should be classed as a deposit that required protection or was simply an advance payment of rent.
The court decided that a sum representing six months’ rent, paid at the start of a tenancy, did not constitute a deposit, but was simply rent in advance.
As such, it did not have to be protected.
This case will provide some welcome reassurance to landlords who seek a payment of rent in advance as a means of reducing the risk of a tenant defaulting on his liabilities.
However, the court of appeal was clear that the character of an advance payment depends on the circumstances. If a tenant pays a sum of money in advance, which should be classed as a deposit, it will fall within the regulations.
Stephanie Robinson is a solicitor specialising in property and commercial litigation at Sheffield’s Taylor&Emmet LLP. Call 0114 218 4000 or visitwww.tayloremmet.co.uk and www.landlorddisputes.co.uk.