Rent in advance: Finding the right alternative

I’d argue that perhaps the single most challenging element of the Renters’ Rights Act for the majority of landlords is the abolition of rent in advance. Letting properties is a business, and fundamental to a successful business is cash flow. Rent in advance provided certainty of income for an agreed duration of time, even if the ability to pay became a problem later. 

So, what’s available to landlords looking for a viable alternative, what questions should you be asking, and what makes a professional rent guarantor a robust option? 

References (or guarantor)?

Does your reference… 

• Tell you income levels, employment status, credit history and previous rental conduct? 

• Indicate whether the tenant can meet their financial commitments?  

• Provide a strong first line of defence against financial disruption? 

A good reference is essential and will cover all of the above. But can it predict the future and protect you against the unknown? A professional rent guarantor service works alongside referencing process to protect rental income even when faced with the unexpected. 

Deposit (or guarantor)?

Not really an either/or decision - security deposits are capped at up to five weeks’ rent. So, while a deposit offers some protection for your property, it can’t provide a viable alternative to a sizeable rent payment in advance.  

Insurance (or guarantor)?

Guarantors and rent protection insurance operate on the same basic premise – a back-up for rental payments if the tenant goes into arrears. You should consider: 

• Is cost a factor? It is the tenant’s decision to use a guarantor, which means that the cost is their responsibility, not yours. With an insurance product, the costs will fall to the landlord. 

• How long do you need the cover for? A typical insurance policy might cover six months’ worth of rent (RentGuarantor covers up to 12 months). 

• Do you need legal coverage? You can purchase an insurance product to provide this, or a provider like RentGuarantor offers mediation support as part of its package, helping to get things back on track before legal fees or eviction proceedings are required. RentGuarantor also handles court applications and associated costs. 

Personal or professional?

It’s important to be clear on what you want to achieve from a guarantor.  

• The obvious requirement is whether the guarantor has the credentials and the financial backing to cover the rent payments for the lifetime of the tenancy. 

• Is there a risk that the personal relationship could turn sour between tenant and guarantor? This shouldn’t impact any legal agreement, but can make for some awkward, emotionally-charged conversations. 

• Are you looking for additional backing from a guarantor, such as mediation or support for the tenant to restructure payments and get things back on track?  

Your guarantor (with the right contract) will be legally obliged to pay the rent, but a third-party professional service separates business from personal and can provide mitigation help. A missed payment doesn’t always spell the end of a tenancy for an otherwise good renter – a professional service can support both tenant and landlord in reaching a positive outcome. 

Which professional guarantor?

A few questions can provide clarity: 

• How long will the provider cover the rent for? This will vary. RentGuarantor guarantees your rent payments for up to 12 months or until you regain possession.  

• How long will the provider act as guarantor for? RentGuarantor would be guarantor for a tenant for up to 3 years, or until you regain possession. Check your terms; not all service providers offer this. 

• How long has the provider been in business? While RentGuarantor has been operating since 2018 and has backed thousands of tenancies, there has been an influx of providers as the Renters’ Rights Act looms. Does your preferred company have a good track record? 

• What credentials do they have? Professional guarantors are unregulated. RentGuarantor is the only provider listed on AIM and as such, is subject to rigorous governance and compliance.  

• How easy is the process? At RentGuarantor, our proprietary tech streamlines the application process and ensures it is as easy and seamless as it can be for everyone involved – tenant, agent and landlord.  

• How quickly will the provider pay out? If your tenant defaults on rent, you’ll want a resolution as swiftly as possible to keep up your cashflow, but you’ll also need to ensure you are covered from a legal standpoint if needed. After the Renters’ Right Act is implemented, RentGuarantor will pay after 3 months’ arrears (and backdate it). This ensures we can follow any legal processes required, which won’t necessarily be possible from a provider paying out from the first month. 

Ultimately, make sure your chosen provider has the financial backing and legal support to deliver when things go wrong.  

The crucial part of the toolkit

Understanding your options as a landlord is all the more crucial as the Renters’ Rights Act looms. Whether you’re considering a professional guarantor as an alternative to other methods of reassurance or alongside, this service is a fundamental part of the core tenancy toolkit, now more than ever.