Rent-to-rent: serviced accommodation, deposit and furniture pack
Arrangements where members source properties for clients to set up a rent-to-rent business are becoming increasingly more common. They are however very complex contracts, involving multiple parties and responsibilities, so can easily go wrong. This case study on rent-to-rent will give you an idea of how we deal with different situations.
Resolution wanted: £20,450 - full refunds of the deposit, sourcing fee and furniture set-up package Award: £10,000Resolved by: Proposed decision
they agreed with the agent to invest in a rent-to-rent agreement for serviced accommodation
the contract was signed and a sourcing fee, a tenancy deposit and a furniture set up fee were paid totalling £20,450
the agent then requested the rent payment before the property was set up without explaining why, so no money was transferred, and some of the set-up costs being charged were higher than advertised
the furniture had not been ordered so the property was not set up as agreed
the agent’s level of service was poor throughout including poor guidance and lack of or delay in responses to queries
the final communication from the agent was notice saying that the tenancy had been terminated and ‘no refunds’ would be made
the complainant then requested a refund of the sourcing fee
the agreement was between the complainant and the landlord and they, the agent, had the responsibility of managing the relationship, with a third-party agent managing the property
once the complainant decided to proceed with the property, the next steps were put into action and the third-party agent was instructed
the complainant then took no measures to set up the property, order furniture or make the first rental payment
the complainant was never told that rent would only be due once the property was set up
after two months, the property was set up however no rent had been paid so notice was given to end the agreement
the rental responsibilities were clear in the agreement - non-payment of rent was grounds for repossession and no refunds were payable
Management agreement
Estimated cost breakdowns
Invoices
Email and WhatsApp communications
The evidence showed that negotiation on investing in a rent-to-rent agreement for serviced accommodation, began in May
A specific property was agreed and two weeks later the agent confirmed the next steps, which included completing the reservation form, signing the management agreement and paying the deposit. This was all to result in the unit going live for bookings
The agreement was signed within a week and the agent requested the first month’s rent and confirmed regular monthly rent payments would start from the eighth of the following month
When the complainant received the invoice for rent, he made the agent aware of his concerns that rent was due before the property was set up. The agent’s response was that rent was payable anyway
The agent told the complainant that the third-party agent had said no set-up date had been booked by the complainant, who replied that they were unaware they had to take this step
An agreement was reached that rent would start to be paid three weeks later to allow for setting up the property. and when rent had still not been paid after six weeks, the agent wrote to the complainant advising that the management contract had been terminated with immediate effect
The case officer’s decision was that:
the complainant entered into a rental agreement with the agent and was responsible for paying the agent rent directly under this agreement. The agreement was marketed to the complainant as a management agreement, implying that the agent was providing a management service. There was no evidence that the complainant had any direct contact, or any form of relationship, with the landlord of the property
the management agreement was clear in relation to the rent payments, which were not conditional on the property being set up and ready for bookings
the sourcing fee, furniture set-up costs and first month’s rent were all requested by the agent
in the agent’s ‘next steps’ email, they confirmed that they were going to introduce the third-party agent who was then chased many times by the complainant, with a limited response, delaying the property being ready
the complainant signed the agreement and was responsible for paying rent monthly in line with the contract terms. Having been reminded to pay on three separate occasions, rent was still unpaid one week after the complainant confirmed that set-up was completed to their satisfaction
the agent was justified in ending the agreement and not refunding the sourcing fee or the deposit paid
in relation to the furniture, over £10,000 was paid to the agent for furniture placed in the property which is being used by someone else. There was no specific breakdown of what was provided, and a full refund of this amount was awarded to the complainant
Yes
No
Any level of property management can be complex, but good communication and help with each step can help maintain trust and a good relationship
With rent-to-rent agreements, make sure any investor clearly understands your terms, what they are investing in and any third-party involvement
If furniture is part of a package being offered, provide a clear and specific breakdown of what is included in the package
For more information on what constitutes material information and how is it changing read here.
