Rent in advance
Property managers have legal obligations when a tenant or prospective tenant offers to pay more than two weeks’ rent in advance.
Scope and application
- A lessor may only ask a tenant for up to two weeks’ rent in advance; a security bond equivalent to four weeks’ rent; and if applicable, a pet bond of no more than $350.
- Once a tenancy has commenced, a lessor cannot ask the tenant for rent until the period covered by the previous payment is finished. Asking for rent before the previous period has ended could be a breach of the Residential Tenancies Act 1987 (WA) and result in a fine of up to $5,000.
- A tenant may offer to pay rent in advance to secure a rental property or suit their personal financial circumstances. In this case, a lessor should ask the tenant to put the offer in writing.
| Lessor | A person who grants the right to occupy residential premises under a residential tenancy agreement; and includes a personal representative, successor or assignee of a lessor; and where the context requires, a prospective, or former, lessor. |
|---|---|
| Property Manager | A person who is licensed under the Real Estate and Business Agents Act 1978 (WA); and in relation to a residential tenancy agreement, the agent of the lessor of the premises to which the agreement relates. |
| Tenant | A person who is granted a right of occupancy of residential premises under a residential tenancy agreement; and includes, where the context requires, a prospective, or former, tenant. |
| Rent | A payment under a residential tenancy agreement payable by the tenant in respect of the tenancy period or part of the tenancy period. |
| Bond (security bond) | An amount payable by a tenant as security for the performance of the tenant’s obligations under a residential tenancy agreement, including for pets where relevant. |
| Trust | A relationship between a trustee and a beneficiary. It is an obligation imposed on a person or other entity to hold property (including funds) for the benefit of beneficiaries. |
|---|---|
| Trustee | A person or entity who holds the trust property for the benefit of the beneficiaries. Trustees are personally liable for the debts of the trusts they administer. |
| Beneficiary | A person or entity with an entitlement to the property held in trust. |
Instruction
- Requests to pay rent in advance
- You cannot ask any tenant to pay rent in advance (except for up to two weeks’ rent at the beginning of
the tenancy). - You should require tenants who want to pay rent in advance to put the request in writing.
- You cannot ask any tenant to pay rent in advance (except for up to two weeks’ rent at the beginning of
- Rent paid in advance to be held in trust by the lessor
- The lessor becomes the trustee of the funds, and, as such, is not personally entitled to the funds.
- The lessor must dispense an amount equivalent to a rental payment from the funds when rent
becomes due, and pay it as rent on the beneficiary’s (the tenant’s) behalf. - Rent becomes due at the end of the period covered by the previous payment.
- The tenant may have a claim against the lessor for any misused, undue or lost funds that were
transferred to the lessor with the intention of paying rent in advance.
- Property managers handling funds
- An agent can hold funds in trust for the lessor without breaching the REBA Act.
- Agents must always act in the accordance with the lessor’s reasonable instructions in relation to the
holding and payment of funds held in trust on a lessor’s behalf. - Any rent paid in advance must be receipted into your trust account, then transferred as soon as
practicable in accordance with the reasonable instructions of the lessor, less any management fees
payable on the gross collections.
- Property managers to inform lessors of their responsibilities and potential risks
- Lessors must refund any money they are entrusted with that has not been expended as rent.
- Lessors are responsible for the administration of the funds held in trust, including crediting the correct
amounts as rental payments when due. - The collection of management fees will change depending on the terms of the management authority.
- Lessors may have no claim against the property manager for management fees payable on rent in
advance that would outdate the management authority, where fees are collected as a percentage of
‘gross collections’. - Where a set management fee is paid, the lessor may have to administer this payment each time
it is due. - Lessors must provide receipts for rent as it is paid.
Is the lessor entitled to the money if the tenant abandons the property?
The lessor may only take action to terminate a tenancy if they suspect on reasonable grounds that the premises has been abandoned. This means that while the lessor holds money in trust that was intended to be paid as rent, they should continue to release rental payments for the duration of the tenancy agreement or until the funds are exhausted, whichever occurs first.
Agreement terminated first
The lessor may issue a Form 1C – Notice of termination without specifying grounds either with
60 days’ notice during a periodic agreement, or 30 days prior to the end of a fixed-term agreement. Refer to ‘Is the lessor entitled to excess funds at the end of the tenancy?’ below.
Funds exhausted first
The lessor may have reasonable grounds to take steps to terminate the tenancy due to abandonment of the premises. The criteria for reasonable grounds are specified in the RT Act.
Is the lessor entitled to excess funds at the end of the tenancy?
The lessor may have excess funds if the tenancy is terminated unexpectedly early or the tenant paid rent in advance which covered a period longer than the agreement. The lessor remains the trustee of these funds and must hold them for the beneficiary. These funds cannot be paid as rent where a tenancy agreement no longer exists.