‘This is why landlords must approach guaranteed rent schemes with caution’

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An Essex landlord has learned the hard way that unpicking rent-to-rent or ‘guaranteed rent’ agreements can be a lot more difficult than many might believe.

In a case handled by the Resolution Department Lead Suzy Hershman (main picture) and her team at HFIS, a landlord who had signed up to have her detached house provide a guaranteed income through a rent-to-rent contract wanted to end the arrangement after relations with the managing agent soured.

The landlord gave the agency, which had already signed up and moved in tenants to the property, three months’ notice stating she wanted ‘vacant possession’.

But the agent declined her request, and the complaint was brought to the HFIS team for resolution.

Vulnerable

During conversations with both parties, it was discovered that the tenants living at the house had been placed by the local authority and were ‘vulnerable’ – so evicting them at short notice was neither practical nor fair.

Also, the rent-to-rent contract used here is a ‘mesne’ agreement due to three parties being involved. Mesne means ‘intermediate’ in old French – so you have a tenant, a ‘head tenant’ (or intermediate) and the owner of the property (the landlord).

Common law makes it clear that unless the original agreement between tenant and managing agent is or was unlawful – which was not the case here – then the only way to end the agreement is for the landlord to evict the ‘head tenant’ (i.e. the managing agent) and the sub-tenant (the people living in the property) through the courts.

No beef

The landlord had no beef with the family living in the property, but rather with the managing agent which she says had been maintaining the property poorly.

HFIS found that the agent had not explained to the landlord why it could not ‘hand back’ the property but, on the other hand, the landlord’s desire for vacant possession of the house was ‘unreasonable’ in the circumstances.

The landlord is left with few options now but is taking legal advice separately about how to proceed.

What are the lessons here?

• Vet rent-to-rent agencies very carefully – for example what’s their office like? How do their staff talk to people on the phone? Are they accredited and do they have valid redress membership displayed in their windows or website?

• Landlords should enter into rent-to-rent agreements with great caution and be well informed. For example, be aware that if they want to end this kind of agreement early, they’ll have to do it through the courts, assuming the initial agreement between agent and tenant was lawful and fair.

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