Debunking the myths: Sub-letting vs Guaranteed Rent

July 19, 2013

AC Forscutt, Northwood’s Compliance Manager, explains the difference between rent to rent and Guaranteed Rent.

“Rent to rent”, “rent the rented”, “multi-let”, “let to let”: four different terms but each a synonym for sub-letting.  It’s a controversial subject and one that’s stirred up heated headlines and debates in the national papers and within the industry itself.

Journalists have lambasted the books, courses and seminars promising an insight into how members of the public can make thousands of pounds through subletting strategies; maximising the number of tenants in a property and splitting them into single lets.

While it isn’t necessarily illegal, it is considered by many to be ethically dubious.  Whatever your standpoint, there are mortgage and insurance implications and landlords need to make sure that they have the correct tenancy agreements in place.  Furthermore, if a landlord works with a tenant only focused on short term financial gains from his sub-tenants, how confident can that landlord be that the property will be well managed and maintained?  In short, landlords need to go into these kinds of deals with their eyes wide open.

The phrase ‘guaranteed rent’ has been used in relation to these schemes, but there is a clear distinction between them and bona fide Guaranteed Rent services such as Northwood’s.

Northwood’s Guaranteed Rent was created to give landlords, particularly ‘accidental’ landlords, peace of mind and assurance that they would receive rent payments every month and that their property would be well managed and maintained.  Northwood do not permit multiple sublets and are discerning about the kinds of property and tenants accepted on our books.

The devil is in the detail…

The differences between sub-letting and Guaranteed Rent are all in the details of the tenancy agreement.  Typically in a sub-letting agreement, a tenant enters into a tenancy agreement directly with the landlord.  This is known as a normal Housing Act tenancy and, indeed, most will have a clause specifically saying that the property must not be sublet.  Despite this, the property is then sublet using leases or exactly the same type of tenancy agreement they had in the first place.

What we do is very different.  Northwood has a Non Housing Act tenancy in place with landlords.   This recognises the fact that Northwood is a company, not an individual, and a legal entity who is the tenant.  This tenancy agreement specifically allows the tenant – in this case Northwood– to sublet the property using a suitable tenancy agreement for the type of tenancy that would be in place.  All of our agreements include a clause which encourages landlords to seek approval from their mortgage company to ensure that it is ok for them to let properties.

Landlords can also rest assured that Northwood is fully compliant with current housing legislation, is a member of The Property Ombudsman, offers financial protection through Client Money Protection (CMP) schemes and Tenancy Deposit Schemes and is dedicated to industry best practice.

Will sub-letting offer you the same peace of mind?

For more information about Northwood and Guaranteed Rent visit www.northwooduk.com.   

Posted in

Comments are closed here.