Occasionally a tenant or applicant offers to pay a substantial amount of rent in advance; this can be sometimes 6, 12 or even 18 months' rent at the one time. Remember the agent is prohibited from seeking any more than 2 weeks rent in advance, Residential Tenancies Act 2010 (RTA 2010), s33(2). Acceptance of an offer to pay however is NOT prohibited.

An offer to pay a large amount of rent in advance may be prompted by a variety of reasons including:

• getting the upper hand on other applicants, particularly in a tight market
• insufficient or inadequate references
• attempt to negotiate a lower rent
• tenant going away for an extended period for holiday or business
• simply for convenience

Whatever the motivation of the applicant or the tenant may be, an agent should discuss the issue with the landlord and obtain instructions. The following matters should be included in the discussion.

Accounting 
Does the landlord want to receive the funds in one lump sum or paid in accordance with the signed management agency agreement (which generally provides monthly)?
In all probability, the landlord will instruct that all the rent be paid to them in one lump sum. If this is the case, the agent should ensure to obtain written authorisation accordingly. It is in the agent's interest to also secure the full payment of their management fee at the same time, (with landlord's authorisation).

Contingencies 
Other matters that should also be discussed with the landlord include the possibility of unforeseen circumstances such as the tenant wanting in the future to break the lease early or requiring to vacate at a date prior to the paid to date of the rent. The landlord should be informed of the tenant's rights, under s47(3) RTA 2010, that requires a landlord to repay to the tenant any excess rent within 14 days of receiving a written request.

The disbursements of any applicable outgoings and repairs or maintenance issues need to also to be discussed. It is also a good idea to obtain the landlord's consent to retain a portion of the funds in the trust account to cover contingencies such as the payment of any outgoings (if usually paid by the agent) and any repairs and maintenance that may arise.
 
 

Silvana Ferraro

Agency Practice and Compliance Advisor

Estate Agents Co-operative LTD