What Is Guaranteed Rent On A HMO Property?

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HMO guaranteed rent is the fixed rent you get when you give consent over your property to a third party for a certain period of time. The third party,-individual or a company- will take the property and rent it to other tenants who will pay them depending on their agreement. On this, the renter will be liable for the tenant’s rent.

What we’ll cover:

The myth of guaranteed rent being illegal

You can sublet the property in several ways: the first involves the management agreement, commercial tenancies, and/or leasing or guaranteed rent on a HMO scheme.

Now, this might seem like a hands-free solution to many but with the increased registration and reduced cash flow, most of the property owners might opt to sell them.

 Guaranteed rent consists of different products, schemes and policies which includes:

  • Insurance
  • Letting agency backed
  • Council backed

For landlords, it’s a good idea to know what you are getting yourself into and what fits you best.
Today we are going to look at some key consideration on whether the guaranteed rent is right for you.

Why guaranteed rent is more preferred than the traditional letting agents?

One of the major benefits of guaranteed rent on a HMO is that the income is certain regardless of whether the tenants pay their rent or not. Even better, the renters are obligated to return the property in the same condition they were given making them responsible for any property damage.

Another advantage that the landlord would enjoy is that they will not incur renewal, letting, or management fee. So the renters are expected to observe all the laws and compliance obligations that agents would deal with relieving the landlord from all of the hustle.

With this, the landlords can budget for long-term because they have enough security to do so. It also doesn’t need to be a HMO for guaranteed rent, many serviced accommodation management structures can be guaranteed rent.

Benefits to the renter on a HMO guaranteed rent agreement

When the renters take the lease they become the landlord. This gives them the opportunity to keep the money the tenants are paying while allowing a more flexible arrangement. With this, they can turn properties with multiple rooms to accommodate single tenants to share areas and facilities.

Considered legal issues

The landlord-renter agreement is that of a commercial nature. The parties should come up with clear terms as to how the renter is supposed to pay the landlord and how much. With this, the lease agreement should include a set duration that the renter has to pay the rent. They should also indicate their responsibilities in terms of property management and their compliance with the related legislation. It is also a common objection to serviced accommodation as a property use, however, with the correct contracts in place there is no subletting or legal issue.

Redress scheme arrangement 

Although with the guaranteed rent model is not like that of letting and property management, the renter still relates to the tenant and the landlord.
They find the tenants and regularly do property repair and maintenance. With this, their work is close to that of letting and property management making them regulated and susceptible to join the consumer redress scheme.

Importance of redress scheme

Since both the tenants and the landlords are termed as consumers with the renter offering services to both parties. If there are disputes between the consumers and the renter, they can escalate their concerns to an independent body.
The renter is there to provide to the consumers with the assurance that they will deal with the property correctly and professionally. Also, the renters can be fined for undertaking the work meaning that they are legally obligated to join the redress scheme (one example being the PRS).

Is guaranteed rent fit for an HMO property?

The promise of the guaranteed rent is enticing. Having the professionals take control, manage the HMO property and the hassle involved in finding and managing the tenants while you get a fixed amount at the end of the day.
Evidently, the renters for a number of reasons believe they can make a profit with the monthly payout therefore if you are smart and have the time, you might consider looking at what they are looking to increase the property income. If that is too much for you, you can go with the guaranteed rent. 

Do you offer guaranteed rent?

We offer guaranteed rent in a number of towns including Bedford, Luton, Milton Keynes and Northampton on HMOs and Serviced Accommodation. If you’d like to know more and receive a free, no obligation valuation, just get in touch with us.