UK Landlord Forum / Life

Hello
I'm new to this.  I've been asked if I would lease my property for three years to a company. During that time I would receive the full market rent, have no voids and the company would pay the council tax and hand it back to me in the same condition that they got it.
Is this too good to be true or should I be sceptical?   Would you take an offer like that?
Albee

Quote from: Albee on November 16, 2015, 10:39:49 PM
Would you take an offer like that?

Yes, providing there were rent increases during the three years.

Would I hand over my property to a company who could sub divide it into many units, cram a load of people into it and lose control for 3 years.....................no.

There are some horror story posts from landlords quoting the above on this forum.

Hi Albee

I have this arrangement on a few properties.  Some learnings:

Only do this with a firm you know (or as you are new to this - someone you trust with your life knows).  There are (as Riptide says) so many horror stories of houses being sublet and divided up.  It's very envogue these days which wasn't the case when I started out many years ago so nowadays be more than wary of such offers.

You say you will receive full market rent - it's all in the small print.  If you think about what you have written - that is an impossibility from the agents view, where is their cut?  What will happen is that they will deduct a larger fee from the rent.  So whilst technically you receive the full market rent the deduction will mean what you get in your hand is NOT what you think is the full market rent. Say 5% for managed let but 8-9% for guaranteed rent service.

You will get back the property in same condition? Oh I doubt that very much.  Even the reputable firms will be driven to get in tenants quickly and no doubt they have a setup with the local housing authority to do so and the quality of tenant may not be the same as you will find.  How much deposit will they give you?  In three years you can get a lot of damage done.

Just check who will be responsible for maintenance.  Do not agree to a clause that allows them to maintain the property and charge you through the nose.

No voids ...yes.   They pay the council tax...yes.

Here is a tip, ask them to send you their standard agreement.  If they send you an AST with their company as the tenant then walk away as they don't know what they are doing.  A lot of these places will set up back to back ASTs with them in the middle as the 'mesne landlord'.

On the flip side once you do get the right company this is a rent and forget system (my brother loves it).  Yes you get a little less rent but it's all about hassle and £s.

Best of luck.

Possibly not the best direction to go if you're new to this.

Thank you all very much.  That was interesting reading.  Not sure what to do now.  I suppose there are up sides and down sides.  The property I have is only two bedrooms so how could they subdivide?  I will be sure to read the small print extremely carefully.  Those percentages sound a bit high!  I thought 5% is more like the norm?  So I don't want at AST, I need a lease, which, I understand, is different?
So if I do trust the company, the rent and forget could work very well.

Come back and let us know how it goes?

I will indeed let you know how I got on.  Thanks again for your advice.

Okay - it has taken a little while to get things sorted but here are the basic details of what this company has offered.  Let me know if you think this is good, bad or downright ugly.
They want me to lease the property to them.  They have shown me a lease, which looks very different from an AST.  They want me to take out a contract with British Gas, (or another provider) for the boiler and keep paying my building insurance.  In return they will pay me the monthly market rate and look after the inside of the property.  I will not need to deal with tenants or have any void periods and I will pay no commission.  I think they will also pay the Council Tax.
Does this sound too good to be true??  If so, what pitfalls should I be looking for or what questions should I be asking?
Thanks for any advice you can give me....

Check what is Monthly Market Rent and compare to what you think you could get..
How long do they want the property?
How does the rent increase?
Who pays for repairs? Cost determined how?
Will they sublet to a single family
What deposit do they pay you?
Do you understand the lease agreement?
Do they have a break or exit clause?
Do you have a right to forfeit?
Have you asked them how they are making any return on the property, if they give you full market rent with no commission, even if they have no tenant?
How long have they been in business?

The only way I can rationalize is they get a kick back from the council - but that to me isn't worth the risk, in which case you should take the deal...but I'd be suspicious.  It's hard to say without reading their agreement.

But I'd be interested...

Best of luck.

Hello again Angry Landlord
Forgive me - I am confused (it doesn't take much!).  The only way you can rationalize is they get a kick back from the council - but that isn't worth the risk. 
Isn't worth the risk for the company?  Is it risky dealing with councils?

Quote from: Albee on December 04, 2015, 06:15:20 PMThey want me to lease the property to them.  They have shown me a lease, which looks very different from an AST.  They want me to take out a contract with British Gas, (or another provider) for the boiler and keep paying my building insurance.  In return they will pay me the monthly market rate and look after the inside of the property.  I will not need to deal with tenants or have any void periods and I will pay no commission.  I think they will also pay the Council Tax. Does this sound too good to be true??

I realise you don't want to hear this, but I'm going to say it anyway... this - above - is not really describing the role of a Landlord. It is more a silent investor of some kind... I think the best part of being a Landlord is the contact with your customers, the Tenants... it's a people business. If you want to disengage from the Landlord aspect completely, talk to a Hedge Fund Manager or suchlike. Let's face it - the highest return, the most bang for your buck, is going to be when no other third party is involved in the equation. What you have here is a situation where you will get full market rate for the property... but this third party will pay all the expenses.

Well, that only happens when the full market rate has been deliberately underestimated and if it's not that, then the way they'll let it means they'll pull in much more than the agreed full market rate... otherwise, simply put, where's the benefit for this third party? You can quickly see this becoming some kind of half-way house for what we might politely call undesirables (I'll say no more) and where these unfortunates are crammed in like sardines. I do not know about you... but that's not the kind of game I want to be involved in.

If you let a property to a Tenant like a family then they pay the Council Tax anyway, not you.

Sorry Albee I've been away

Yes I meant it isn't worth the risk for the company...
Yes dealing with councils is a big risk, most of which are unscrupulous bast@rds who will happily cut off a tenants support payments and then help the tenant fight your possession order...

I just don't see how the company is getting anything out of this unless their definition of market rate is loose to say the least..
You can stipulate in the agreement only single families but if you only have two bedrooms then perhaps this isn't an issue (unless of course you have two living rooms as well?)...

Best of luck

Check on the company. Are they a property company or another sort who need to house their staff? Do they have any CCJs against them? Google them. Do a credit check.

I did rent to a company at one point and it went like clockwork.