Is rent in advance legal? We blogged on the outcome of the English case of Johnson and Ors against Old, which concerned a tenant who had paid six months rent in advance. The court held that this payment of rent did not fall under the definition of a deposit. The decision was based on the wording of the Tenancy Agreement as well as the intentions of the landlords and tenant.
We've received many queries from clients regarding the issue of taking rent in advance. In doing so, landlords and agents must be careful about the wording within their lease.
Some landlords want the initial first months rent to be a higher sum than the subsequent months. So long as your lease specifically states that the first months rent will be X pounds and the subsequent months rent will be Y pounds then this is fine, as the intention is clear.
Landlords get into risky territory where they suggest that they will take an increased sum in the first month of the tenancy and 'hold over' part of that sum towards payment of rent in the last month. There is an argument that this could constitute holding funds as 'security', and that this could fall within the definition of a deposit and require to be lodged with a scheme.
Additionally, it's important to highlight that the Rent (Scotland) Act 1984 states that in certain circumstances, where the advance payment of rent is being imposed on the tenant as a condition of the grant, renewal or continuation of the tenancy, that payment could constitute an unlawful premium. The 1984 Act also specifies that any requirement for a tenant to make a lump sum payment of rent in advance, more than six months before that rent falls due, can be struck out as being a void clause.
Where a landlord or agent wishes to introduce a requirement for payment of rent in advance (whether or not this is intended to replace the taking of a deposit) they should seek specific advice in relation to the wording of their lease to ensure they do not expose themselves to risk. Our LetLaw team would be happy to assist with the wording of specific clauses. Please get in touch for information or advice.
