If I accept an offer, is the tenancy guaranteed?
Most people agree that the property sales process is badly designed in England: either party can pull out at any time up to the exchange of contracts. Industry estimates suggest that up to a quarter of sales fall through before reaching the contract stage (this will be less in a hot sales market).
The process works better in letting. However, it is still open to exploitation by dubious / indecisive landlords and tenants.
An inadvertent verbal or written contract
A contract between landlord and tenant can be created verbally so any agreement before the tenancy agreement is signed and exchanged must be ‘subject to contract’. In reality, a verbal contract is difficult to enforce, but it’s a good idea not to make yourself vulnerable in the first place.
A written contract, such as an email, can be construed without a formal tenancy agreement and this can work against you, e.g. if you intimate in an informal email that someone can become your tenant and then you change your mind. So again, add ‘subject to contract’.
When is an offer guaranteed?
An offer is only guaranteed when the Tenancy Agreement is executed with both the landlord’s and tenant’s signatures. At this point both sides become liable for their obligations. If one party is delaying signing, then it should be regarded as suspicious and action should be taken.
A good process looks like this:
1. We (the agent) put an applicant’s offer to you (the landlord).
2. We negotiate until both parties agree.
3. We confirm the offer in writing, stating that it is subject to contract.
4. We start due diligence on the tenant’s references.
5. When the references are signed off, the tenant signs the agreement and then the landlord signs the agreement.
6. Keys are only released when all ‘movein monies’ are received and cleared.
How many offers fall through?
Around 5% of our offers fall through once an application fee has been paid.
There are two main reasons for why offers fall through:
Poor credit history and references A minority of applicants try to hide their poor credit history and it can sometimes be difficult to flush out credit issues before putting offers to the landlord.
Change of mind / indecision People can be unreliable – they love the property one minute, then suddenly have second thoughts.
This is one of the 50 most asked questions in our new book: Landlord Intelligence.