Rent Now loophole bad for the landlord?

I thought until recently that the following clause in OpenRent’s Rent Now AST agreement was watertight:

“The Tenant shall pay to OpenRent on the signing of this agreement the amount of the Deposit and the first payment of Rent, unless the Tenant and the Landlord have agreed in writing a later date when payment may be made. This agreement shall not become binding on the Landlord until the Tenant has paid the Deposit and the first payment of Rent, and the Tenant shall have no right to occupy the Premises, until this payment has been made in full.”

Now I’m having second thoughts. What if the tenant, landlord and if applicable the guarantor have all signed the lease agreement but the tenant doesn’t pay the deposit or the first month’s rent? Maybe they’ve unexpectedly lost their job, hospitalised and unable to earn, death in the family, whatever. The lease agreement won’t be binding on the landlord but wouldn’t the landlord be stuck in some kind of limbo, unable to do anything? I think a time limit for paying the deposit and first month’s rent is required, say 5 days at most, failing which the signed AST beomes null and void.

Couldn’t OpenRent include a time limit clause? Presumably such a clause would be enforceable in law, so the tenant couldn’t challenge it. Any suggestions for wording such a clause? I’d rather not pay a solicitor to prepare a legally binding clause.

Thanks in advance for any responses.

It is for exactly this reason that I do not let any tenant sign the TA until I see the deposit and first month’s rent in my account. Typically this happens the same day they are due to sign, sometimes it literally happens on our phones while we’re sitting in front of the blank paperwork. But as a LL, I have far more to lose in this transaction than they do and therefore that’s my policy.

I’ll add that in 26 years of letting multiple properties, I’ve never had a tenant fail to do this and not a single one has ever objected.

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Thanks tatemono, but I can understand why a prospective tenant might not want to pay a lot of
money (in the London market, we’re typically talking four to five thousand pounds) to a landlord before a lease agreement is in place. As the landlord is the last to sign the lease agreement, I think a tenant who waits until the landlord has signed before sending money is behaving sensibly. Glad to hear that your modus operandi has worked for you but I’d rather go with OpenRent’s Rent Now as it protects the tenant’s interests as well as mine, provided of course there’s a time limit clause for paying the first month’s rent and the deposit.

A good landlord should send the tenant evidence of ownership of the property and other relevant documents before asking for any money, but I agree with Tatemono that you should have the funds in your account before signing. Ive only ever had one or two tenants baulk at this and Ive allowed them to bring cash on the day.

The clause about it not being binding on the landlord until payment is received should mean that despite being signed, no contract has been made if they havent paid. In practice you would communicate, give them a couple of days and then tell them the offer of a tenancy is withdrawn.

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I can understand it too, but they risk losing a property and trust works both ways. Their choice, but I would just move to the next applicant in the queue if they didn’t agree to my terms. And yes, I’m happy to prove ownership.

I think playing the London card is unfair though. While it may run into thousands of pounds there, a deposit and first month’s rent totalling, say, £950 here in Teesside is very hard for many applicants to pull together. While the numbers differ significantly, they are almost certainly equivalent in terms of the risk involved for the applicants when you consider economies of scale.

Thanks David122, but once the landlord has signed the lease agreement it’s a binding contract, not an offer. But I think I’ve missed the point where the AST says “the Tenant shall pay to OpenRent on the signing of this agreement…”. It’s only the tenant who has to sign at this stage and then the landlord can wait for the money to be paid to OpenRent before signing. That way the tenant and the landlord are both protected. If the tenant doesn’t cough up, there is no contract and as I understand it the landlord can just walk away.

I think I need to apologise to those who have taken time to respond as my original point about a loophole isn’t valid.

Something that really surprises me though in these days of scams is that people are prepared to hand money over directly to landlords purely on trust.

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No its not. A contract needs a consideration and this one explicitly states that its not binding until the rent and deposit are paid.

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Does the Openrent platform allow the tenant to pay the rent, between the time of the tenant signing, but before the agreement has been signed by the Landlord?

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Thanks David, you’re absolutely right, I’d forgotten about consideration. But I’d rather wait until the tenant has paid before I sign the lease as I’m not sure how long I’d have to wait for the consideration to be paid before walking away.

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There has recently been a thread relating to this posted by @Caryn ( I don’t think I can use rent know again)
Reading the above still leaves me confused as in her case, it appeared she was contractually obliged to honor the contract and proceed with the tenancy even though she didn’t want to?

Caryn probably didnt need to proceed with the tenancy whatever she was advised. In her case I think the contract was made as the tenant had paid,
but she could have refused to allow the tenancy to begin. Although the contract holder could then have sued the landlord for their losses under breach of contract, this would still be a better outcome than handing the property to a bad tenant.

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Yes, I’m living a nightmare right now because this happened to me.
OR get all parties to sign the agreement BEFORE any money is taken.
As soon as the tenant hadn’t paid on the date of the tenancy start I knew they were going to be a nightmare. I emailed OR and they sent me to a link but it didn’t give me an out.
I didn’t release the keys until they paid - 4 days late. But they never paid again - and now I’m pursuing them through MCOL and Section 21.
The Rent Now process is not for me.

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That’s a good question. I seem to remember that that the tenant signed the lease agreement and paid the money to OpenRent before I signed it but that was over a year ago and maybe I’m mistaken about that. The phrase “the tenant… on the signing of this agreement…” could mean when the tenant signs or it could mean when the tenant AND landlord sign. To be honest I’m going round in circles here and getting more and more confused. Maybe I’m overthinking it. What I want is a situation, not just for me but for everyone, where the tenant’s interests are fully protected so that they don’t have to worry about the possibility of being scammed when forking out a lot of money upfront, and where the landlord’s interests are also fully protected and they don’t end up in Caryn’s situation. I also like OpenRent’s digital signing feature, which meant getting signatures from three tenants and two guarantors, one of whom was abroad on holiday, wasn’t a problem. Maybe my original post about the landlord being left in limbo was valid after all. I think I need to take this issue up directly with OpenRent.

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Thought I’d update here as I now have my property back.
However, I had to be a little creative and I had to basically forfeit the arrears.
I started a MCOL against them and told them I would not pursue it if they left the property and returned it as they found it. I gave them till the end of the S21 (26th August) and if they weren’t out the offer would be off the table.
I explained in great detail what the consequences of going to court would be for them and that I was giving them an opportunity to walk away and be free of the arrears (just over £1400).
In my view, that’s a small amount compared to what it could’ve eventually been plus I didn’t have to deal with lengthy court proceedings.
The house is also in fine condition and I have new tenants moving in this week.
Few lesson learned along the way but I’m glad it’s over and I can put it behind me.
Thanks to anyone who gave me advice and hope it might help highlight some pitfalls to anyone else going forward.

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Glad you got it sorted.