Guaranteed rent’ which is also termed as ‘Rent to Rent’, is where an individual or a company may acquire a certain property for a certain period of time from a landlord and will offer a guarantee to pay a fixed amount of rent to the landlord.
Here the landlord will offer consent to this third party, who is ‘the Renter’, who will then rent that property to some other tenants.
The Renter and the other tenant become liable for the rent.
There can be many ways to sublet any property legally, where usually the following things are involved:
- Commercial or corporate tenant
- Management agreements
- Guaranteed rent schemes
If you are a landlord and interested to let out your property under a guaranteed rent scheme or a tenant looking for quality accommodation then you can contact City Borough Housing who can help you.
How do these schemes work?
In this kind of arrangement, the middle tenant as mentioned above as ‘the Renter’ will sign a contract with the landlord where he will offer a guarantee to pay a certain monthly income as mutually agreed with the landlords after taking full control of that property and its management.
Thereafter ‘the Renter’ who is a middle tenant will try to market the property to find any suitable renters, and perform all of the necessary tenancy administrations like:
- Handling the property maintenance
- Making sure that the property remains compliant with all relevant legal requirements
- Taking care of entire legal proceedings when the tenant living in the property
- Also, manage the eviction of tenants if needed
The middle tenant or ‘the Renter’ agrees on a monthly rent which will be guaranteed to the landlord. This guaranteed rent is usually below the property’s market value.
The success of ‘the Renter’ who has created a business enterprise will then rest on his ability to find a tenant so that he can achieve enough rental income out of that property to cover all his expenses and is able to generate a profit.
Often this can only be possible by converting any multi-bedroom property into a certain HMO and thereby earning a higher yield by doing many single-room and renting to several unrelated tenants by entering into individual contracts.
What legal issues the parties must consider?
The first agreement made between ‘the Renter’ and the landlord is totally of a commercial nature.
Hence, they must enter into a lease agreement for the property for a certain period of time. During this period, ‘the Renter’ will be paying the Guaranteed Rent.
Also, both parties must have clear and unambiguous business terms as to exactly what amount ‘the Renter’ has to pay the landlord and all the responsibilities in terms of the total management of the property as well as the landlord’s compliance with all other legislation related to renting property.
With the help of a ‘Guaranteed rent’ agreement, a landlord will be assured of regular rent (lower than market rate) after entering into an agreement with a third party called a Renter, who will manage the whole property and sublet to another tenant and also maintain the property.