One of the changes that has come into effect under the Renters’ Rights Act (RRA) is that it is no longer legal for landlords to accept more than one month’s rent in advance of a tenancy beginning. Previously, there was no limit to how much rent tenants could pay up front to secure a property, which was particularly helpful in certain circumstances, such as:
• Where tenants had sufficient money to pay the rent – e.g. in savings - but struggled to pass affordability checks for some reason.
• If there was a bidding war (which is also no longer permitted under the RRA) and a tenant had some savings, they might be able to gain the edge over another applicant by offering the landlord a lump sum at the start of the tenancy.
While these new rules have been introduced to help tenants by ensuring the application process is fairer, particularly for those who are less well-off, it does mean some tenants will find it harder to satisfy standard affordability checks. This might include self-employed workers and those on zero-hours contracts, as well as tenants whose work is intermittent, such as actors and musicians.
It’s worth emphasising that these checks are important to make sure the rent is likely to be affordable for the tenant over the long term – particularly as landlords can no longer evict a non-paying tenant at just two months’ notice. Proof that affordability checks have been carried out is also necessary to satisfy landlord insurance requirements, particularly rent guarantee insurance. And, as a tenant, it’s important to remember that consistent rental income is what enables landlords to keep investing in maintaining and improving your home.
So, if you used to pay rent up front, what can you do now to help reassure a new landlord that you can afford their property and there is little risk of you falling into arrears?
1. Provide a guarantor. This is someone - usually a family member - who is prepared to co-sign your tenancy and take responsibility for paying the rent if you default. The landlord will carry out referencing and affordability checks on them, as they would any applicant. Having a guarantor is the most common option, as it provides the most reliable security for a landlord.
2. Provide evidence of capital. If you have savings or assets that can be easily liquidated, you can provide bank statements or portfolio summaries to the landlord. And if you have an accountant or financial adviser, it may be helpful if you can either allow the landlord to contact them, or secure a letter from them confirming your finances.
3. Agree to make a lump-sum payment after the rental agreement is signed. While it is not legal for the landlord to accept rent in advance of the tenancy beginning, and they cannot demand more than one month’s rent up front, if you offer to voluntarily pay in advance once you’ve signed the rental contract, the landlord can accept it without breaching the Tenant Fees Act. Obviously, this is a greater risk for the landlord, as nothing can be confirmed until the tenancy is signed, but it’s certainly worth discussing.
4. Secure financial support through government benefits. Under the RRA, landlords are no longer allowed to discriminate against tenants in receipt of benefits, so if your income doesn’t meet the affordability requirements, it’s worth applying for Housing Benefit or Universal Credit.
Bear in mind that it may take a little longer to find a rental property, given that if landlords have a choice of applicants, they are more likely to choose one who easily passes all the affordability tests. From your perspective too, it’s important to check that the rent isn’t going to be an uncomfortable financial stretch for you.
If you are finding it hard to satisfy affordability requirements or you’re concerned about making a move to a new rented home, our lettings experts are always here to help. Just get in touch with your nearest branch and have a chat with one of the team.
