In this article we take a detailed look at the things to look out for when considering a rent to rent. Some of the outline topics covered included:
- what is rent to rent?
- conflict of interest of agents and their fiduciary duty to landlord clients
- permissions required
- the types of tenancy to be used – between owner and renter and between renter and occupiers – including length of terms
- repairing obligations
- licensing (both Housing Act 2004 and Rent Smart Wales)
- right to rent considerations
- deposit protection
- council tax considerations
- gas and electrical safety
- water notification
What is Rent to Rent?
Rent to rent is a different method of operating rented property to the normal agency arrangement where a commission will be taken based on rent collected. With rent to rent, the property would be rented from the owner and then sub-let to tenants by the renter. Where an agent is operating in this way, the agent is no longer an agent but is in fact both a landlord and a tenant.
It gets complicated because there are effectively two (or more) landlords – the owner and then the person renting the property.
Although each party will be a landlord or tenant (or both at the same time), the following terms will be used throughout this article to make it easier to follow which person is being discussed at the time:
- owner – this will technically be the superior landlord (sometimes called the head landlord) and doesn’t necessarily have to be an owner but in most cases will be. For example, where there is a flat in a block, the owner would actually be a leaseholder.
- renter – this will be the person or company who rents the property from the owner with the intention of further letting the property to occupiers normally on an assured shorthold tenancy. The renter will be the tenant of the owner.
- occupier – this will be used to define the persons in actual occupation. Normally these will be regular assured shorthold tenants. Their landlord will be the renter.
An agent might be approached by a property owner wishing to rent their property. The agent may decide to become the tenant of the owner and rent the property from the owner and guarantee the rent. The rent offered would normally be below market rent. The agent (now the renter) would then let the property to some tenant or tenants totalling a higher rent than what the renter is paying to the owner. In theory, when the property is fully let, the renter should be receiving more rent than what s/he is paying to the owner.