When renting a property, it is common for landlords to ask for a token advance. A token advance is a sum of money paid by the tenant to the landlord to secure the property before signing the rental agreement. This is a practice that has become common in the real estate industry as it helps to ensure that the property is not taken by another interested party while the rental agreement is being prepared. In this article, we will look at what a token advance is, its purpose, and some tips for tenants to keep in mind while paying it.
What is a Token Advance?
A token advance is a small sum of money paid by the tenant to the landlord before signing the rental agreement. This is done to secure the property for the tenant until the rental agreement is prepared. It is called a token advance because it is usually a small amount of money, usually less than 5% of the rental amount.
Why is a Token Advance Important?
The purpose of a token advance is to secure the property for the tenant until the rental agreement is prepared. It ensures that the property is not taken by another interested party. The landlord may also use this money to take the property off the market until the rental agreement is signed.
Tips for Tenants
When paying a token advance, it is important for tenants to keep in mind a few things:
1. Ensure that the landlord is genuine: Before transferring any money, ensure that the landlord is genuine. Check the landlord`s identity and property ownership documents.
2. Get a receipt: Always get a receipt for the token advance payment. This will serve as proof of payment and can be used as evidence in case of any disputes.
3. Agree on terms: Before making the payment, agree on the terms and conditions. Discuss the purpose of the token advance, the rental amount, and the period for which the property will be held.
4. Understand the refund policy: Understand the refund policy in case the rental agreement is not signed or if the tenant decides not to take the property. Some landlords may deduct a portion of the token advance as a processing fee.
In conclusion, a token advance is an important part of the rental process. It helps to secure the property for the tenant until the rental agreement is prepared. Tenants should ensure that they pay the token advance to a genuine landlord and agree on the terms and conditions before making the payment. They should also understand the refund policy in case the agreement is not signed or if the tenant decides not to take the property. With these tips in mind, tenants can ensure that the token advance payment process is smooth and hassle-free.