Tenants who pay months in advance?

In a bank account, upfront, sure. Any PM worth their management fee would be encouraging the extra $ over rent upfront - not only benefits the owner, but also the PM because they get a slightly higher commission.

I can't believe the PM came back with that, knowing full well you cannot ask for more than a certain amount upfront depending on state (Vic is 1 month).

When I got my office I had no previous rental history (commercial wise) and I was trying to negotiate rent upfront with a rent free period. Every month rent free they took off, I took a month off my advanced payment

 

But is this correct legally?

Money is held on trust for the person giving it and until that rent is due and payable it would belong to the tenant. If the tenant is of the understanding they are paying it to the landlord and they authorise the agent to release it then it would be held on trust for the landlord. It is at this point that they receive the rent from a tax point of view.

 

Yes, as has been iterated by all of the forum's goto PMs already.

 

The accountants I've spoken to previously about this very issue have said as soon as funds are receipted for tax purposes it is then included in the FY received.

Happy to be corrected by any of the other accountants as this is clearly not my field, but from what I've been advised money is immediately the owners.

 

Depends on the terms of the trust - what is the relevant legislation?

 

Have a tenant who overpays February - November and then doesn't pay December or January. I assume its a Christmas/budgeting type thing.

 

Here is the legislation for nsw
s86 PSABA Act
PROPERTY, STOCK AND BUSINESS AGENTS ACT 2002 - SECT 86 Trust money to be paid into trust account

So it depends on the terms that the tenant deposits the money on. If they ask the agent to hold this money on trust until the rent is due then it is their money up unit this point, and the landlord does not receive, even constructively, until the rent falls due or the tenant asks the agent to pass it on to the landlord.

But if the tenant says here is 6 months rent I would think they are not asking that the money be held on trust, but just handing it over to the landlord.

Most tenants wouldn't even know about the existance of the trust account I suspect.

 

None of them are asking PMs to be their savings account Terry

 

If a PM rang me and said your tenant has paid x in advance, but we were directed to keep the money in trust, I would be saying, so why are you bugging me then ?

Doing that would just annoy everyone, unless it was because they were going away and not sure when back.

 

Thats not such a bad plan... just like I pay 6 months of council rates in the July quarter so I don't have to pay them in October.

 

I'd consider it if I were a tenant and unemployed. I'd offer to pay the whole lease upfront to show I could pay it.

And then I wouldn't actually do it.

Heh

 

Send bank statement please sir

 

Not sure what you mean DT, none of my posts in this thread relate to accounting. I was just referring to the legal issue on who the agent holds the money on trust for.

 

And we already answered that a couple of times. If the intention is for it to be rent (and it always is), legislation requires us to receipt it as soon as possible. This extends their 'paid to' date. It can legally be disbursed to an owner from that moment onward, minus our fees.

If a tenant has overpaid and wants some back, we have to honour that. That's regardless of whether its already been disbursed to owner.

 

Yes that is the case.

 

Interesting responses. So it looks as though, for the average tenat with the average landlord, it's better to pay a month or so in advance at the most because otherwise the landlord and the PM might just have to pay it back - which is probably more of a pain for the PM having to explain it to the landlord and then actually getting the money back - might have to be very firm!
And that advance payments are mostly done here when the tenant could be seen as possibly 'dodgy'.
The only time it would be seen as favourable is if you happen to have an Asian landlord who was brought up with the Asian way.
Thanks for the replies everyone.

 

Why would tenant do this?

 

You're saying I'm dodgey!?....

 

Thought that was a given

 

Sometimes foreign students do, they're sent over by parents with tuition money, rent money, car money, etc and just pay upfront