Property Redress wants regulation for Rent to Rent properties

The government announced last month that “buy to let” (BTL) landlords will need to register with a redress scheme, as this is already compulsory for all letting and estate agents.  The Property Redress Scheme (PRS) says this should be extended to include “Rent to Rent” businesses.

This seems reasonable to me, although presumably the reference to Rent to Rent businesses also includes individuals who run one or more of these properties.

However you may not be familiar with what this is all about. I referred to this in my book as it has become increasingly popular in the last couple of years, but it involves risks notably for tenants if it has not been set up correctly, yet tenants may be unaware of its existence.

It has become an attractive strategy for property investors who cannot raise sufficient money to buy a property themselves but who want to run a property business, and generate some cash. In fact some entrepreneurially-minded students have started this strategy when they are at university by renting out other rooms, but I am not suggesting that you do it!

Effectively,  Rent to Rent involves someone taking over a property from a landlord (usually one who is tired of the hassles and increasing costs) and in return gives them a guaranteed amount of rent for an agreed period of time. The landlord then agrees for the R2R operator to let and manage the property. This is usually on a room by room basis.

The problems come if  the R2R operator is inexperienced or a rogue. There can be issues over insurance (probably invalidated) and whether the landlord’s mortgage company have approved the sub-letting of the property or the rooms inside it (could result in repossession). In addition, what happens if the landlord stops paying their mortgage?

So, if the government quickly follows through on this, it will be good news and should help provide more protection for tenants. In the meantime, when you are looking to rent a property always ask for proof that the “landlord” is the real owner of the property.

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