Rent 2 Rent Contracts - What Should You Use? — Rent 2 Rent Success

Get Your Rent to Rent Contracts Right!
Because getting this wrong can cause so much heartache, headache and expense.

Rent to Rent is a great strategy and it can really transform your life and help you create consistent cashflow that’s lifechanging.

There are some important things to know though.
Things that could trip you up.
In this article, we step you through what you need to know about contracts to ensure you are legal and compliant.

Here’s a question from Joel which a lot of people ask.

“What is the correct type of contract to use for a rent to rent with the letting agent or with the landlord?"

There seems to be a lot of confusion. You definitely should not use ASTs (Assured Shorthold Tenancy Agreements) or corporate let agreement between you and the landlord or letting agent.

Important Note
I am not a solicitor, this is not legal advice, I am simply talking here from my own experience.

There are two types of rent to rent contracts which should be used between you as the rent to renter and the landlord or letting agent.

Lease agreement
Management agreement

Lease agreement

This agreement is a commercial lease and gives you the right to rent the property and rent it out to your own tenants or guests for a specified period of time.

You would use a rent 2 rent lease agreement when

Your agreement is direct with the owner, and
The property is an existing HMO or commercial property

Management agreement

This agreement gives you the right to manage the property on a specified basis (eg HMO or serviced apartment)

You would use a rent to rent management agreement when

Your agreement is with the letting agent or the owner and
The property is not an existing HMO or commercial property

Ensure You Do This!

With either agreement it is important to ensure that you explain to the property owner that they must ensure that

Their mortgage lending (if there is a mortgage) allows use of the property as a house share (HMO) for the tenant type you want or permits serviced accommodation
Their insurance allows use of the property as an house share (HMO) for the tenant type you want or permits serviced accommodation

So many people who would be able to set up great businesses don’t go ahead because of concerns about mortgages.

The simple solution to this, if you’re doing HMOs is..

Work with properties which are already HMOs!
The owners already have the right lending and insurance in place

Do I Need a Solicitor?

You can go to a solicitor and have your contract drawn up.

Using a solicitor is expensive and time consuming

And you might think that you’ll get a better result and you’ll be more protected if anything goes wrong.

We thought that too…

We were surprised to find that many solicitors do not understand the business model of rent to rent, even though they say they do!

And if you have any issues and go back to the solicitor, you will find that in the contract you signed with them, you’ve agreed that with extremely few exceptions they are not liable if anything goes wrong.

Why You Should Use a Tried and Tested
Rent 2 Rent Contract

To protect yourself as much as possible it’s important to use the right contract and include the right clauses.

Many people don’t realise that solicitors start with a template for each contract type and then rely on YOU to advise all the clauses you would like to see in the contract.

When you’re starting out you won’t know all the clauses you need.

And if they are unfamiliar with rent to rent, which most solicitors are, your solicitor won’t know which specific clauses you need.

Over the years, we’ve had our contract revised to add new clauses.

For example, one of the things I see quite a bit is people struggling because a landlord won’t make essential repairs such as fixing a broken boiler in Winter. Our contract states that owners must respond to emergency repairs in a specified period and agree works to be carried out. If this doesn’t happen, we are able to carry out the works and recover the funds from rent.

We’ve never had to do this because we have great relationships with all of our landlords but the clause is there for exceptional cases to protect our tenants.

We also include a clause which states that if the law or statutory regulations change which change Council Tax or our ability to multi-let the property, we can re-negotiate and/or exit the agreement.

These are just two of many important examples I could give you about clauses to be included in a rent to rent contract.

Make sure you work with someone who understands Rent to Rent and test for it, even if they say they do!

Do I Need to Go to a Solicitor for a New Property for Every Rent 2 Rent Property I Take On?

Now this might be controversial but my answer is NO YOU DON’T!

You know who will tell you that you do?
That’s right yes.
Solicitors!
Solicitors will say you need a new contract with them each time.

Let me ask you a question though, do letting agents go to a solicitor for a new contract each time they take on management of a new property?
Of course not!

They edit the existing management contract with the details for the specific owner, property and agreement.

Exception
The only exception to this is where you are taking a property on rent to rent with an option to buy. Where you are contracting with a property owner to rent and then buy their property using either a lease option or an exchange with delayed completion, it is wise to have a bespoke agreement drawn up by a solicitor for each property.

For us, rent to rent, property, business and life in general is all about the win-win.

It’s good for you and it’s good for us.
It’s good for our landlords and it’s good for us.
It’s good for our tenants and it’s good for us.

Our goal is to deliver exceptional value and use our experience to help others to achieve success quicker.

We’ve made our rent to rent contracts available to buy as we saw so many people using expensive solicitors who didn’t have the expertise to deliver what is needed for a rent to rent business.

And we haven’t just included the contracts.
We’ve also included

Both commercial lease and management agreements
GUIDE - A guide as to when to use each type of contract
UNDERSTANDING - An explainer document explaining each clause and translating from Legalese to English!
SAMPLE - Sample completed contracts showing how to complete the contracts
TEMPLATE - A template word document for you to add your branding and details and start using

We’ve included everything you need to be successful and more!

get the contracts

See you soon!
Stephanie & Nicky
xx

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