Complaints against two letting firms offering guaranteed rent through the agent becoming the tenant and then sub-letting the property, have both been upheld by the Advertising Standards Authority.
The upshot suggests that agents following this model will have to detail the arrangement in any advertising or other promotions.
The cases were both treated individually, but the firms, Reliance Property Management Specialists, and Smartinvest Capital trading as Victoria Knight, are in east London, and are under the same ownership.
Reliance said on its website that it offered guaranteed rent 365 days a year, guaranteeing its landlords full monthly rent payments even when the property was empty.
The complainant said that the guaranteed rent claim was misleading, because it suggested that the rent would be guaranteed in all circumstances.
The complainant also said that the advert did not make clear the significant limitations.
Reliance told the ASA that it acted as the tenant and then effectively sub-let the property.
A rent recovery insurance policy allowed the letting agent to claim for unpaid rent where the tenant had defaulted. It also provided cover for legal costs involved in pursuing a tenant.
Two landlords both told the ASA that they had continued to receive rent when their properties were vacant.
However, the ASA said that consumers would not understand from the advert that the guaranteed rent was base on Reliance becoming the tenant and then sub-letting the property.
The ASA said that this was material information likely to cause consumers to take transactional decisions they would not otherwise have taken.
There were also terms and conditions but a copy of the full terms was not available for landlords to read on the website. For example, there were limitations to the guaranteed rent for landlords if the property was uninhabitable.
In the case of Victoria Knight, its website said: “We are one of the few letting agents in the country who offer rent guarantee with professional working tenants.
“Our rent guaranteed service offers the assurance of a fixed monthly rental income without all the hassles involved in being a landlord.”
The challenge from the complainant was the same as in the Reliance case.
Again, the ASA ruled that because Victoria Knight did not make it clear that the agent became the tenant and sub-let the property, its rent guarantee claims were misleading.
Both sets of adverts have been banned.
Comments (12)
Clearly a lack of legal knowledge here has led to some unfortunate and misleading outcomes which I don’t think were intentional.
https://www.2nproperty.co.uk/rent/guaranteed-rent/
Some people are completely disingenous about what they are offering
https://assuredrent.co.uk
Why do Agent try and mislead people, never mind banning the advert ban the agent, it’s so wrong and doesn’t do our industry any good.
Surely no one actually falls for this “guaranteed” nonsense do they? How can it possibly be “guaranteed”?
Because they’re rent to rent arrangements! Despite Mr Walker’s protestations, Northwood’s offering is no more than subletting but with Northwood they’re big enough to self insure void periods/non-payment of rent by sub-tenants. However, imo, they must have to charge quite a profit-rent to make this worthwhile and cover the downside costs. So, the real landlord must risk getting the worst of both worlds; lower than market rent plus potentially crappo tenants when Northwood start getting desperate to fill voids. Or, do they limit this offering to landlords whose properties are slam dunk lettable? In other words just a marketing hook which the uninformed fall for?
Despite my protestation??? Our website clearly states that we become the tenant and sub-let. However we do it on a sound legal footing.
As were are responsible for the rent, the very last thing on our mind is ‘crappo’ tenants – quite the opposite. We are very selective as if we are not, it’s we who suffer. It’s all about risk management and that’s where our experience sets us apart. Lower than market rent? True, but no letting or management fees, no VAT and no commission. Its a product many landlords like, if it’s not for them, we offer the usual tenant find, rent collect or management. We can offer a cheaper Legal & Rent protection insurance policy too. We always quote the market rent too and let the landlord decide. As I have said, transparency is key.
Words and figures differ I’m afraid. Disappointed Northwood clients are my richest source of new landlord business. Keep believing your own PR, its doing wonders for mine!
I am pleased that the ASA has addressed this issue. The provision of Guaranteed Rent differs hugely from the rent guarantee insurance offered by many agents and it’s crucial that landlords are properly informed. Transparency is key.
Of bigger concern is that agents who sublet a property under a GR scheme are extremely unlikely to have the appropriate PI Insurance which would cover them in the event they are named as ‘landlord’ in any action. Most PI Policies have endorsements as letting agent and managing agent. The policy is most unlikely to cover an agent sub-letting where they are named as the landlord on an AST.
In the event of, say, a personal injury claim this could have catastrophic consequences on all parties. We have a bespoke and exclusive policy not available elsewhere.
Providing guaranteed rent of the type described above requires specialist knowledge and specialist PI Insurance; it’s not as simple as just sub-letting.
…Er, isn’t Guaranteed Rent a supposed USP for Northwood? How does what this lot are flogging differ from yours?
I don’t want to write an advert! The simple fact that in the event of a claim, where an agent is named as landlord on the AST, that the PI Policy will not respond is sufficient differentiation. Lots of agents use various incarnations of our GR service and the errors we see are frankly too numerous to mention.
Am I being thick but this is from your website:
How does it work?
We effectively become your tenant, guaranteeing you a fixed rental income. We then sub-let the property, taking great care to select the right tenants and then manage the property throughout the full duration of the tenancy – leaving you to get on with your busy life
Not much to report today, see you same time tomorrow 😉