Q&As

How does a rental guarantee agreement work in a residential development context and is it appropriate for a developer to use the promise of a guaranteed yield as an incentive in their market campaign?

read titleRead full title
Published on LexisPSL on 15/02/2017

The following Property Q&A provides comprehensive and up to date legal information covering:

  • How does a rental guarantee agreement work in a residential development context and is it appropriate for a developer to use the promise of a guaranteed yield as an incentive in their market campaign?
  • Guaranteed rent
  • Consumer protection

Guaranteed rent

The usual meaning of a rental guarantee in a residential property context is that a seller/developer of a property will guarantee to the buyer a certain rental income on the property for a specific period of time. The buyer/property owner then leases back the property to the developer who then sublets the property to a third party. The developer then pays the property owner the guaranteed sum each month and keeps the commission or the profit made on subletting (if any). Practice Note: Rent guarantees and Precedent: Rental guarantee schedule, whilst drafted from a commercial perspective, give further detail on the concept and pros and cons of using a rental guarantee.

The terms of the rent guarantee agreement are vital, as are the terms of the ‘tenancy agreement’ with the occupier. The agreement between the developer and the property owner is a commercial agreement, albeit over a residential property, and should cover all legal aspects of the agreement and clearly deal with a

Related documents:

Popular documents