Case Study

Who is paying the rent? Landlords beware when accepting new tenants

30th July 2019

Who is paying the rent?  Landlords beware when accepting new tenants

Rental income is of course key to any succesful letting business, but landlords always need to be vigilant about who is paying the rent.

Too often issues can arise where a landlord has failed to check who the payments are coming from. If relationships then start to breakdown, assertions are made by the tenant or unknown third party, that they are either no longer the tenant, or that a new party, previously not known to the landlord, has become the tenant.

If landlords are not careful they can suddenly find that a company, with little or no assets, is asserting that it has become the tenant, simply because they have been paying rent for a prolonged period. A landlord may have been very diligent and carefully negotiated the terms of a lease with either an individual tenant or a company pausing to consider and require guarantees, but all of this hard work goes to waste when it transpires that there has been a change of payee some time during the lease term, and the payee starts to contend they are the tenant.

The creation of a new landlord and tenant relationship, can be hugely detrimental to a landlord’s ability to pursue its original tenant or indeed the occupier for dilapidations and/or the breach of any lease covenants.

AGA’s and rent deposits could all become academic if there has been an assignment of the lease or creation of a new landlord and tenant relationship.

If a landlord is aware that a party other than the tenant named on the lease is paying the rent, they should invite the tenant to sign a document to confirm that no landlord and tenant relationship is created with the third party. If the tenant is uncooperative, at the very least the landlord should send their own letter making this clear.

If you would like to discuss any of the issues raise in this article, please contact Property Disputes Partner, Nyree Applegarth.

 

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