How does Rent To Rent work? Part 2 of 2 - The Saj Hussain Show - Episode

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Rent to Rent is also know as Let to Rent, Let to Multilet, Let to Let, Rent 2 Rent, Guaranteed Rent and even Lease Option without the option.
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[@DavidWood2]

I was in agreement with what you said about with taking properties on on a management agreement or commercial lease - then you went on to mention company/corporate let at 14:35. A corporate let agreement with a landlord is unlikely to be suitable - it will usually be drafted for a landlord letting to an artificial legal person such as a limited company which uses the property to house its own staff or contractors, often with no subdivision allowed. Corporate lets are most unlikely to be suitable for someone wishing to sublet and/or divide the property, both of which are essential for the scheme you are outlining. Management agreements may well not create an appropriate relationship between the parties. A mistake by the agent might leave the landlord exposed to criminal liability. An even bigger problem for rent to rent via management agreement is that, as a matter of agency law, the agent owes a fiduciary duty to their principal, which requires them to put the principal's interests over their own. In particular, an agent is not allowed to make a profit that is not authorised by the management agreement - an unauthorised profit belongs to the principal as a matter of law! There is a very high level explanation of this at www.landlordlawblog.co.uk/2015/02/16/agency-law-basics-for-landlords/ . Any breach of the management agreement likely leaves the rent to renter liable for damages for breach of contract. A wise landlord wanting 'hands off' use of their property on a rent for rent basis should probably insist on a commercial lease and a rent to rent operator having a commercial lease is then free to make full use of their rights under that lease without fiduciary duty interfering with their commercial freedom. In other words, a properly drafted commercial lease acts to protect both the landlord and the rent to rent operator. However, as acknowledged in the video, it might well be impossible to get a commercial lease over property that is mortgaged or subject to any other sort of charge, also you will probably be limited to freehold property (though, in practice, this will likely not be an issue as the kind of properties required to create a HMO are likely to be freehold). Do check for covenants limiting the use of the property you intend to lease and for easements giving third parties rights over some part of that property - if the property is registered land you can obtain a copy of the title certificate online from the Land Registry for very little. There are lot of ways to get rent to rent wrong from a legal perspective - see www.landlordlawblog.co.uk/2017/04/10/david-smith-gives-advice-landlords-rent-rent/ for some discussion, whilst nearlylegal.co.uk/2014/01/confederacy-of-dunces/ is also worth reading. Whilst these pieces are written primarily for landlords, many of the issues should concern you as someone intending to operate a rent to rent scheme. Getting HMO licensing (which has been extended recently), planning permission or insurance wrong could be extremely costly, as can failing to carry out right to rent checks on your tenants. Breaching the landlord's mortgage terms or, if the property is leasehold, the terms of the head lease could also leave you in tremendous trouble. Be very careful about adjusting pre-prepared tenancy agreements to meet your requirements when letting to your tenants without taking legal advice. The perils of that are discussed in www.landlordlawblog.co.uk/2017/05/03/tenancy-agreements-33-days-tips-day-17-unfair-terms-2/ (though you'll probably need to read www.landlordlawblog.co.uk/2017/04/26/tenancy-agreements-33-days-tips-day-16-unfair-terms/ first to understand the background unless you are familiar with the law on unfair terms in consumer contracts). In particular, it is very unlikely that you can "let" the rooms on a licence; almost certainly your tenants will need to be on assured shorthold tenancies - the reasons for that are explained in www.landlordlawblog.co.uk/2017/01/25/tenanacy-agreements-33-days-tips-day-3-tenancy-license/ . Another area where you need to be careful is in relation to data protection. It is almost certain you will have to register with the ICO as a data controller in order to operate any sort of HMO business. A final area where you need to be careful is liability for your operations. If you engage in any sort of property transaction as an individual then you potentially put all your personal assets at risk. It might be better from a liability perspective to use a limited company, but landlords are most unlikely to want to enter into a commercial lease with a new limited company of essentially nil creditworthiness. Be aware, too, that the law is different in England than in Wales. Scottish law and Northern Ireland law are even more different. To be clear, I am not saying rent to rent is wrong. If set up correctly, rent to rent can give the landlord a moderate regular income from a property whilst the hard working rent to renter makes a profit from his or her hard work, as was explained in the video. However, rent to rent is not as simple as renting a property from a high street lettings agent as if you were going to live there yourself, getting a bunch of people in there with minimal paperwork and watching the profits roll in! Such an operation would leave you with no valid tenancy on the property (you would sign an assured shorthold tenancy that requires you to be in occupation and almost certainly prohibits subletting), a bunch of "tenants" with uncertain rights to occupy and potential criminal liability for breaching HMO legislation. For right to rent you need a proper business plan for your operations, to engage with the legal complexities of entering into a commercial lease for the property you are renting, then follow all the legal requirements for setting up what will almost certainly be a HMO subject to licensing and to let the rooms on assured shorthold tenancies (including energy performance certificate, right to rent checks, annual landlords gas safety checks if there is any gas in the building, deposit protection and so on). Disclaimer: these are just some thoughts that come to mind based on my legal training. Whilst these comments are believed to be correct I am not a qualified lawyer and am not in a position to give formal legal advice. I do not have any formal training in landlord and tenant law.

[@TheSajHussain]

Agreed a corporate let is not the right structure, however I have seen some agents try to push the rent to renter to use this document as it is the only one they are familiar with. Thanks for the comprehensive post David.

[@plamenkechev]

Hi,very good and educational video and very good reply from David Wood. I have been watching tones of videos and reading few books and deeper I go into R2R I get more confused by the legal site of it.It looks like everyone has got an opinion on this. Most of the people in the business are doing management agreement,but do you need any legal requirements or at least to be member of ARLA or Redress Scheme licence. I do not understand like what you are representing yourself and who regulate this. I are not an agent, but you are not a tenant either. I would love to do this, but the right way. I do not mind to do manegmen course or Hmo course or etc. But which one to do to be on the legal side. What kind of insurance do you need and and what tenancy agreement to do with the tenant? You should put your name as a management company of landlords behalf to sign and the tenants. MY QUESTION IS WHAT YOU ARE AND DO YOU NEED SOLICITOR FOR THE MANAGEMENT AGREEMENT AND THE TENANCY AGREEMENT AND DO YOU KNOW ANY SOLICITORS DOING THIS and how much would it cost? Many thanks. David Wood, you look like you know the law, is there any chance I can get in touch with you. [e-mail] This is my email, if you interest. Many thanks to both of you

[@plamenkechev]

@@TheSajHussain Hi Saj I have just comment on David Woods reply, I really want to start my property business and i was thinking to start with R2R, but I WANT do it right and legal. Where can I find a Management agreement and Tenancy agreement or which solisitors to use. I would love to meet you for a mentoring or couching, even for 1h. My emails is: [e-mail] Many thanks

[@CodeCommand]

thank you for this!

[@DrFonsecaA]

I'm Starting a Rent 2 Rent business today in Spain... I will let you Know how it goes...

[@TheSajHussain]

Thanks Douglas, let us know how it goes.

[@DinizEngland]

Thanks Saj, I’ve subscribed.

[@TheSajHussain]

Thank you. I hope to deliver good value for you.

[@tipstosoar]

Great video thanks for sharing Saj

[@TheSajHussain]

You are most welcome Marc.

[@angelwingz3245]

Hi Saj, I'm really loving your content, thank you and look forward to meeting you in November for your Birmingham networking meeting. Can you plse let me have a copy of a script you would use when contacting current HMO landlords (via letter) with a view to finding a rent to rent deal. Thank you for any help you can give in advance.

[@yaredivans311]

Hi Saj! I’ve subscribed to your channel and been watching your videos, I think you offer great content! I was wondering if you could send me some of the contracts you use as an example, the letters you send to landlords and the scripts you use when speaking to agents? It would help me a lot! I hope to hear from you soon. Many thanks!

[@herbasi7483]

Hi Saj, would a common law agreement not cover a rent to renter in this instance? Rather than a commercial lease?

[@grigorijoga1143]

Another great video 👌🏼 Do you offer mentoring Saj?

[@mikeb1587]

great teaching

[@TheSajHussain]

Thank you Mike

[@samiraadam4117]

Where do I access the two types of contracts if I am thinking of doing rent to rent using the council to provide the tenants

[@pennykiruka9314]

Nice video

[@TheSajHussain]

Thank you Penny

[@CodeCommand]

question? If I bought a HMO ready property that the landlord has a HMO license for, would I still need to buy a license if I become the landlord via a commercial lease?

[@TheSajHussain]

Licences are issued to the individual and not the house. So yes, you will need to apply for a licence if you have a lease. If you are using a managing agreement then it may be possible to keep the existing licence and for you to be added to it as the manager.

[@faz..]

As always awesome video. In a R2R would you grant a licence or a tenancy to the end users of that property?

[@TheSajHussain]

Always a standard tenancy for us.

[@Servanity]

Hey, great video! Really useful. Just wondering about the furniture rental companies you mentioned.. whats the best way to contact you?

[@TheSajHussain]

Hi Servanity, best way to contact me is through the website www.Sajhussain.com/contact-us/

[@acastro4152]

Hi Saj Thank you for sharing your knowledge. How do I get a script how to talk to letting agents or landlords?

[@TheSajHussain]

Here it is. www.sajhussain.com/rent-to-rent-script/ It is quite an old script and I will be doing a new one soon.

[@thishandleistakensogoaway]

Watching this after 5 years where gas bills have become ridiculous :(

[@Flowsho]

Hi. I'm a new subscriber. Thanks for this video. Is this strategy still relevant till date?

[@TheSajHussain]

Yes, Foluso it still works. However, it has evolved.

[@fitzgeraldchikoba2725]

Great video Saj! By any chance you offer mentoring?

[@TheSajHussain]

Yes, I do run a mentoring programme. www.sajhussain.com/let-me-mentor-you/

[@Teeazu]

Hello Again Saj, Can you put me in touch with your friend leasing the appliances please.

[@TheSajHussain]

Hi Tee, send me an email to [e-mail] or message me on facebook.com/TheSajHussain and i'll message you back the contact details.

[@ShahidHussain-gz4th]

Hey saj can you please send me a script of talking to an agent/landlord

[@emanmajid8181]

Hi Saj tried to email you but failed. Could you send me the templates and scripts you mentioned in your videos pls

[@TheSajHussain]

Sorry you had problems emailing. Here you go www.sajhussain.com/rent-to-rent-script/

[@sachinshetty4467]

Hi Sajid.. with rent to rent we essentially are managing HMO. Does that mean I need to register myself is there any regulation to be followed?

[@TheSajHussain]

Yes, if you use the management agreement route then you are effectively acting as the agent. The other option is to use a Lease Agreement then you become the landlord.

[@sachinshetty4467]

Thanks Saj!

[@kaler329]

@@TheSajHussain where can I get the lease agreement template

[@TheSajHussain]

@@kaler329 Most commercial solicitors can draft an agreement for you. We share sample agreements on my courses and workshops.

[@kaler329]

@@TheSajHussain thank you for the message how much is your course

[@addyybrown4661]

The video is buffering

[@TheSajHussain]

Should be okay now