This is for a sfh on a 12 month lease in NV.

Have a prospective tenant who has offered to prepay 12 months lease payments in advance -- sounds good (too good??) to me!!

Says they are starting business and don't want monthly rent expense to show up in their financials...

Besides making sure this lump pre-payment is valid (cashiers check or money order), documenting acceptance, and delivering monthly statements showing draw-down of lump being applied to that month, what risks are there and what additional precautions would you take?

Thanks for your seasoned advice!

Can you do an actual one-year lease (i.e. not 12 months for a year -- but an actual single one-year agreement)? In Michigan, we would have to do that. Otherwise, all pre-paid monies like that would be seen as deposits -- and would therefore violate the law that says that the deposit cannot be more than 1.5x the monthly rent.

In any case, yes, I've done this -- in a situation where a guy had recently lost his job but had also recently won $20k playing Keno. I did a one-year agreement and he paid for it up front. Worked out well.

- John...

As in Brad above, I've done it and I will do it again. Be sure the lease or addendum states that you retain all rights of eviction for any other issues than nonpayment of rent, and that if you evict you will return all unused rent through the date of termination. One additional point: Unless you want to pay taxes on the whole amount, get two checks - one dated now covering payment through Dec. 31 and one post-dated for Jan. 1, 2011 for payment through remainder of lease. Of course, they could stop payment on the post-dated check, but if they do you could evict them for nonpayment. The other way to handle the income tax issue is to set up a escrow account or use your attorney's escrow account for the year's lump sum and then withdraw rent once per month.

Per John's suggestion i have looked through NV revised statutes and don't see (or recognize) any prohibition against prepaid rent, but I'm not a lawyer..

Good suggs on adding/clarifying lease provisions retaining rights to evict on any non payment related issues.

Per John's question on writing as one-year lease vs 12-months -- my agreement is for one year lease, payable in 12 monthly installments (aka rent)...would i have to change that?

Good point on taxes Lynx, which option did you or others do? (1 check, 2 checks, escrow, other?)

Mark: I couldn't confirm this in the actual law due to lack of time, but a quick Google search had a site that listed the maximum security deposit in NV as "Maximum deposit amount of 3 month's rent".

So, it won't be listed in the law as a "prepaid rent" clause -- it is more an issue of whether or not any prepaid rent is considered a deposit (which it usually is) and then if your state has any maximum deposit law.

If it really is 3 months then someone pre-paying a year's worth of rent could be seen as giving more than the 3 month maximum deposit.

That is why I mentioned maybe needing to do a PERIOD of 1 year as opposed to a PERIOD of a month for a lease of a year. That works in Michigan because Michigan security deposit law isn't defined as 1.5x the MONTHLY rent, but is instead 1.5x the PERIOD rent. So, 1-year periods are allowed.

If NV says that it is 3x the monthly rent specifically, then that might be an issue -- even with the year period. So, be sure to double-check on how the "maximum security deposit" part is written in NV law. Just to be safe. :)

- John...

Found this for Nevada:

NRS 118A.242: "1. The landlord may not demand or receive security or a surety bond, or a combination thereof, including the last month’s rent, whose total amount or value exceeds 3 months’ periodic rent."

So, Nevada law appears to reference "months" directly. That MIGHT be an issue for you for collecting a year's worth of rent up front -- even if you try to call it a year PERIOD and avoid anything mentioning monthly at all.

I'm not a lawyer; your mileage may vary; look both ways before crossing. Good luck! :)

- John...

1. Make sure this is not one of those international internet frauds - Don't refund ANYTHING. A quick check to the Secretary of State or Atty General office would bring some peace of mind.

2. make sure the funds clear before handing over keys, at least first month's and deposit.

3. Shady? I suspect there is another REAL issue to "launder" this money as rent - ex-wife, back child support... If a guy is starting a business, wouldn't he want as much cash on hand at all times? Banks want to see cash. The bank will want to see what he pays for housing, whether prepaid or not.

4. I'd take it in a heartbeat, but keep a watchful eye. Not normal for people to pay such amounts in advance.

Although in CA you cannot collect more then 2 months rent (unfurnished unit) as security deposit you could collect 6 months worth of prepaid rent, but no more then 6 months.

Again, that is state specific. CA must specifically define prepaid rent? In any case, Michigan clearly defines any pre-paid monies as deposits -- and then states the 1.5x the normal period rent maximum. So, Mark will want to double-check for NV.

- John...

Thanks John for digging into NRS for me on the periodic/monthly thing, my old Nolo LL Legal guide was a little vague on that.

I'm tending to agree with Chris and Brad's skepticism as to this tenant's story about why they want to prepay, just doesn't make sense...and I can't afford potential legal hassles just to accomodate their peculiar situation or scheme.

Will try to find out more if given the chance...

Where have all the "conventional" renters gone, seems lately I'm getting nothing but special cases.

Thanks all for sharing your time, input and 'sixth sense' gut feel/judgements, I appreciate them all.