Payments in Advance and the Renters (Reform) Bill Amendments

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Payments in Advance and the Renters (Reform) Bill Amendments

The Renters (Reform) Bill has now been introduced to the House of Lords and as a consequence a fresh version has been published with all of the amendments introduced in the House of Commons included. This is helpful as it was increasingly hard to read due to the very large number of amendments that had been made.

One of the areas where there has been further changes is in the very first section of the RRB. This prohibits fixed term tenancies and makes any attempt to impose a fixed term ineffective. This is largely unchanged. However, this first section also limits rent periods to be either one month or 28 days.

Among the recent amendments were one that specifies that rent periods cannot be different from the periods for which rent is payable and any provision which seeks to make them so is of no effect. This seems to eliminate the line of cases such as Laine v Cadwallader which specify that a rent period is the period for which the rent is said to be for (i.e. the rent is £500 per calendar month) and a payment provision (i.e. rent is payable quarterly in advance) are different. In future that will not be permitted and any attempt to make payment periods different from rent periods will not be effective.

This creates an important question. It is not uncommon where a tenant is not able to provide adequate financial references to seek rent in advance. This is particularly common with overseas tenants who might well be able to easily afford the rent but cannot show any financial history. The normal means of dealing with this would be to express the rent as a monthly figure but then specify that the rent is payable six monthly in advance. That structure seems to be entirely prohibited by the changed wording as the payment period (the six months’ in advance part) would be of no effect and disallowed.

What is odd about this is that the DLUHC is adamant that this is absolutely not what the provisions do and they are saying that rent in advance is still allowed. The mechanism the DLUHC is suggesting is that a landlord would simply decline to sign a tenancy agreement until an advance rent payment was made. I do not see how this would be enforceable however, The only means I can see of doing this would be for the contract to say it was a monthly rent, payable monthly, and then specify that the first six payments of rent had to be made together in advance. But neither of these options can possibly be right. The courts would be likely to take a dim view of such an approach and see it as an effort to achieve an unlawful rent period payment by the back door.

Ultimately, whoever is right the point is clearly arguable either way and this is something that is likely to find itself coming before the highest courts, probably quite soon after the Bill comes into effect.

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