Deposit protection claim

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    Deposit protection claim

    Hello, my situation is as follows: I have had an agency as a corporate tenant for several years, but this tenancy ended prematurely as they could no longer afford to pay the rent. The agency seems to be effectively bankrupt now; I have recently learned that they did not protect their tenants deposits. One of these tenants now wants to take me to court to get his deposit (+financial penalty) - he must be aware that the agency won't pay; however, the contract he has clearly states that the landlord is the agency and I am not mentioned in the contract at all. I am just the owner of the property, and I have secured the deposit of my tenant (the agency). Do I have joint liability for the agency's failure to protect the deposit of their tenants? I understand that it is the landlord's responsibility to protect the deposit, so I think the question comes down to if I can be considered to be the landlord of my tenant's tenant.

    #2
    Under s18 of HA 1988,
    http://www.legislation.gov.uk/ukpga/1988/50/section/18
    if a sub-landlord (agent in your case...) tenancy ends then the sub-tenant (occupants) becomes the superior-landlord's (that's you) tenant on the existing terms, you being the new landlord.

    And under s.3 Landlord and Tenant (Covenants) Act 1995,
    http://www.legislation.gov.uk/ukpga/1995/30/section/3
    in law the new landlord takes on the benefits and liabilities of the old landlord.

    So were I to be in your shoes (such arrangements generally being frowned upon..) i'd try to settle asap: Probably offer 2xdeposit, plus return of deposit when they leave.

    Sorry, tough issue, painful.

    Who provided the tenancy with the agency? Please don;t tell us the agency did....
    I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

    Comment


      #3
      I don't see how a superior landlord in such a case can be considered to have received the deposit from the sub-tenant for the purpose of deposit protection.
      I am not a lawyer, nor am I licensed to provide any regulated advice. None of my posts should be treated as legal or financial advice.

      I do not answer questions through private messages which should be posted publicly on the forum.

      Comment


        #4
        Originally posted by theartfullodger View Post
        Under s18 of HA 1988,
        http://www.legislation.gov.uk/ukpga/1988/50/section/18
        if a sub-landlord (agent in your case...) tenancy ends then the sub-tenant (occupants) becomes the superior-landlord's (that's you) tenant on the existing terms, you being the new landlord.

        And under s.3 Landlord and Tenant (Covenants) Act 1995,
        http://www.legislation.gov.uk/ukpga/1995/30/section/3
        in law the new landlord takes on the benefits and liabilities of the old landlord.

        So were I to be in your shoes (such arrangements generally being frowned upon..) i'd try to settle asap: Probably offer 2xdeposit, plus return of deposit when they leave.

        Sorry, tough issue, painful.

        Who provided the tenancy with the agency? Please don;t tell us the agency did....
        First of all thanks for your quick reply! To be clear, the claimant (sub-tenant)'s tenancy with the agency ended way before the agency's tenancy ended with me, so I think there cannot be a transfer of liabilities caused by the end of the agency's tenancy with me. The tenancy with the agency was provided by some other (serious, reasonably big) agency who also set up the contract. I agree with what KTC says, how could I protect what I never received?

        Comment


          #5
          Originally posted by CuriousPerson View Post
          the claimant (sub-tenant)'s tenancy with the agency ended way before the agency's tenancy ended with me
          That's something you really needed to have included in the first post....
          I am not a lawyer, nor am I licensed to provide any regulated advice. None of my posts should be treated as legal or financial advice.

          I do not answer questions through private messages which should be posted publicly on the forum.

          Comment


            #6
            Originally posted by KTC View Post

            That's something you really needed to have included in the first post....
            I totally agree, and I apologise for omitting this important detail. I guess it means that I should be fine,
            but I still wonder if and how a claim can be made against me.

            Comment


              #7
              Originally posted by CuriousPerson View Post

              I totally agree, and I apologise for omitting this important detail. I guess it means that I should be fine,
              but I still wonder if and how a claim can be made against me.
              I really can't see how they can -- if they could then a claim could be made against a freeholder of a block of flats -- who is essentially in the same position. If a tenant chooses to sublet as an autonomous entity, you can hardly be held responsible for the legality of that subletting.

              But they might under some circumstances (as detailed by artful) become the landlord.

              Comment


                #8
                Not directly relevant to the question but more to Artful's rather worrying message:

                According to Shelter https://england.shelter.org.uk/housi...ing/subtenants

                Subtenants's tenancy usually ends if immediate landlord's tenancy ends but there might be exceptions especially if the subletting was with permission, or if rent is accepted by the higher landlord. So I don't think it is the case that if my tenant illegally sublets and then dies/does a runner or whatever I take over their mess (deposit defaults etc etc).

                Comment


                  #9
                  I don't think Shelter are right in this instance.
                  I think when they say that "Your tenancy often ends if your immediate landlord's tenancy ends but there are exceptions to this rule" they're just flat out wrong.

                  It's a basic problem of rent to rent.
                  The rights and obligations of the company who typically rent from the superior landlord are mismatched with the rights of their own tenant.

                  The occupying tenant will pretty inevitably have an assured or assured shorthold tenancy with lots of rights, while the company will have a common law tenancy with fewer rights and obligations.

                  So the company (for example) can usually end their own tenancy quite easily, while ending their tenant's tenancy can take ages.

                  And the superior landlord can inherit the tenancy as Mr Lodger asserts.
                  When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                  Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                  Comment


                    #10
                    So it provides a wonderful mechanism for an abusive tenant (or indeed anyone who wants to abuse someone who happens to be a landlord) even though that landlord is completely innocent of any wrongdoing, and with the bully being totally immune to any penalty.

                    So if I want to bully a neighbour who is a landlord -

                    a) Me, A, gets a friend B to take a 6 month tenancy on their property
                    b) Another friend C starts a company C1
                    c) B grants C1 a tenancy
                    d) C1 lets to another friend D involving a 2K deposit which they don't protect
                    e) D then trashes the property, is absolved formally of all wrongdoing by C1, while reducing the rent payable to £1/month.
                    f) B skips the country and C1 dissolves
                    g) D refuses to leave while paying only £1

                    Cost to the landlord - perhaps £50K

                    How can this be right in any plausible legal system? And how does one price in this sort of possibility into the rate of rent for normal folk.

                    Comment


                      #11
                      Originally posted by AndrewDod View Post
                      How can this be right in any plausible legal system? And how does one price in this sort of possibility into the rate of rent for normal folk.
                      B and C are not "normal folk", they are criminal psychopaths.

                      But, seriously, this only works because B skips the country, otherwise they're liable for the costs incurred by the landlord.
                      No legal system can adequately cope with a) someone who flees its jurisdiction and/or b) someone with no money who runs up large debts.

                      Pretty much any series of events where at the end a badly behaved tenant "vanishes" or moves to a different country probably has a disappointing outcome for the landlord.
                      When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                      Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                      Comment


                        #12
                        Actually JP, I think it is fundamentally different to someone with whom you contract skipping the country. Here they (who skipped/dissolved) have set up

                        a) contracts (a rental rate of £1 on a fixed agreement)
                        b) liability to pay a possible 6K deposit penalty
                        c) Absolution from ongoing and later damages to the intermediary by way of a falsified inventory

                        all of which we are saying becomes the responsibility of the person who never had anything to do with creating those contracts in the first place.

                        None of this happens if a tenant skips the country (except possibly avoidance of some rent and recovery of damages).

                        I also ask the question I asked before. In law, the freeholder is not in a fundamentally different category. Why does the freeholder also not bear this type of risk (the position could be that if a lessee granted a 300 year lease, no ground rent, and absolution from higher agreements to a sub-lessee then the freeholder would be bound by that in the same way) -- or that the tenant of a lessee becomes the tenant of the freeholder at some £1 rent for 500 years -- that's not going to happen

                        -- so why have we created laws along an apparently seamless and logical sequence that deprives some parties along that chain of almost all rights, while others along the same chain have massive rights. Is it a type of feudal legal corruption?

                        Comment


                          #13
                          Good grief! That's complicated So the moral of the story is: don't allow sub-letting.

                          Comment


                            #14
                            Originally posted by AndrewDod View Post
                            Actually JP, I think it is fundamentally different to someone with whom you contract skipping the country. Here they (who skipped/dissolved) have set up
                            My point was that the law can't do much when the person responsible for compensating someone else isn't available to pursue a legal remedy.

                            In your example, B could be pursued for all of the landlord's losses, but by removing B from the playing field, it makes it appear that the law is flawed.

                            While all analogies are flawed in some way, you're blaming the law for allowing something to happen on the basis that there's no one available to act against.

                            a) contracts (a rental rate of £1 on a fixed agreement)
                            b) liability to pay a possible 6K deposit penalty
                            c) Absolution from damages to the intermediary by way of a falsified inventory

                            all of which we are saying becomes the responsibility of the person who never had anything to do with creating those contracts in the first place.
                            a becomes the responsibility of the landlord, which they could remedy by increasing the rent. (It doesn't matter for your example, but, actually, the rent of £1 a month would stop the whole thing dead in it's tracks, because the minimum rent for an assured tenancy is £250 a year)

                            Liability for b is not transferred, when a landord changes, historic liability is retained by the contemporary landlord. The new landlord may be liable to protect a deposit that they haven't got, but the penalty isn't possible.

                            c is a result of your losing B. B is liable to the landlord for the damage, but you've removed them from the game, so that false impression is possible.

                            I also ask the question I asked before. In law, the freeholder is not in a fundamentally different category. Why does the freeholder also not bear this type of risk?
                            Because the specific legislation that creates this situation applies to reversions of Assured and Assured Shorthold tenancies only (s18 Housing Act 1988). If the result of removing the layer can't be an assured tenancy, one isn't created.
                            When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                            Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                            Comment


                              #15
                              OK, it is useful to know I would get at least £250 of rent per year for the next 10 years .....

                              Comment

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