Tenant breaking AST

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    Tenant breaking AST

    My tenant signed an 18 month AST with my letting agent with a break clause at 12 months with 2 months notice. My letting agent is charging 10% for a let only service.

    Apart from the rent for month 1 the tenant has not paid me any rent. As soon as he was 2 months rent overdue I served a Section 8 notice. He responded by sending me an email stating that he would move out in one month. In doing so he says that he was following the instructions in the small print of page 3 of the Section 8 notice which states "If you are willing to give up possession without a court order, you should tell the person who signed this notice as soon as possible and say when you are prepared to leave"

    Given that he is not paying me rent, his moving out is in my best interest. I have told him he is breaking his contract but have decided that I am not going to pursue him for lost future rent as I will hopefully relet quickly. Rather than pursue possession/unpaid rent as initially intended I have put a claim through moneyclaim online for the unpaid rent. He has received notification from HMCS and has verbally admitted that he owes this rent and will pay up rather than go to court but will deduct his deposit (£1750) from the amount owed (£3800). He still has a few days to officially respond to the court notice.

    My letting agent has told me that as the contract is being broken they intend to deduct their remaining fees (£1500) for the whole contract from the deposit, which as per a clause in their AST. My tenant feels that this is an unfair charge under the Unfair Terms in Consumer Contract Regulations 1999 and refuses to pay. The letting agents have told me that if I keep the property on their books and relet it through them they will refund me fees charged from the date of break clause (March 2009) to end of original contract. They will still deduct from the tenants deposit even if the relet the property from the next day.

    So at the end of the day, the letting agent gets double fees, my tenant potentially walks away without paying rent and I am left significantly out of pocket without even much of the deposit to rely on.

    Any advice on how to proceed appreciated.

    #2
    It appears that you are dealing with both a bad tenant and a bad agent.
    As far as the tenant goes, I'd avoid making any further oral or written commitment - just hope that he does in fact pay £2050 and leaves the house. You leave open th option of suing him for further losses but i wouldn't rate your chances of success in this area, very highly.
    I'd be as tough as possible with the Agent. They did you a considerable disservice by providing you with a bad tenant and they want to charge you £1500 for this. Any fool can find a bad tenant. Even if they paid £1500 to you, you would still be out of pocket. Presumably, they can't just deduct the money without your agreement. I definitely wouldn't agree. I'd ask them for full details of the process which they used to find the tenant. I'm sure that their procedures will fall well short of "due diligence". Tell them that in the absence of proof of due diligence, you are prepared to take the matter to any regulatory body they may be registered with and if they are not so registered, to the Courts

    Comment


      #3
      Is the deposit not held in TDS? if so it will be for them to decide who gets what and I can imagine the agent being very high on that list.

      Comment


        #4
        Thanks.

        I did not want to complicate the thread further by talking about the agent's errors.

        The tenant is a long-standing client of firm (very large national firm). However they do not have a record of an ID check, have no records of his previous address, and I have since found out that T's employment reference comes from a company which he owns! So there has been complete lack of "due diligence". I was naive enough to believe them when they said that the tenant was "fully referenced".

        The deposit is held by TDS.

        Comment


          #5
          It's difficult to advise definitively without seeing the tenancy agreement or the terms of engagement between LA and LL, but the default situation is that deposit is money provided by the tenant to be held on trust (either by the LL or the LA) as security for the tenant's performance of their obligations under the tenancy. Whilst it is technically possible to make the LA a benficiary of a term under the AST, it would be highly unusual indeed.

          What the LA might really mean is that the tenant has defaulted on the rent, the deposit is now being used to defray the rent and has thus become the LL's money (as opposed to being held on trust by them). As the LL's money is in their account, they are exercising a lien over it in respect of the contractual fees due as between them and the LL.

          From what you say about their referencing procedure, it seems the LA may be in breach of the term implied into all contracts of service to exercise reasonable care and skill in the performance of the contract. You may take the view that their breach caused your loss.

          If I were you, I'd propose a fair compromise:

          1) Immediate refund of all fees due for the remaining term.

          2) Agreement to allow LA 2 weeks sole agency to re-let on same terms as last time. If no letting secured after 2 weeks, you are free to go elsewhere.

          I wouldn't agree to any "credit back" nonsense.

          Inform them gently but politely that if they try to sting you for the fees up to March 2009 then you will sue them for your losses occasioned by their failure to reference the tenant properly, and you'll report them to whatever bodies they are members of and the OFT (potential unfair terms), and if that's not enough, you'll also have a Gypsy's curse put on them.

          PS: did the LA protect the deposit in a TDP scheme?

          If the AST provides that the deposit in some circumstances can become the agent's money, I would imagine the TDP adjudicator would decline jurisdiction on the grounds that their remit (I would imagine) only extends to resolving disputes between the deposit holder and the tenant, not to resolving issues between the LL and the LA over fees. If they do decline jurisdiction, then it would have to go to court to be sorted out.
          Health Warning


          I try my best to be accurate, but please bear in mind that some posts are written in a matter of seconds and often cannot be edited later on.

          All information contained in my posts is given without any assumption of responsibility on my part. This means that if you rely on my advice but it turns out to be wrong and you suffer losses (of any kind) as a result, then you cannot sue me.

          Comment


            #6
            The exact term from my agreement with LA is as follows:

            "Where the tenancy has terminated prior to the agreed minimum tenancy term advised in the tenancy agreement, and that termination is due to a breach by the tenant OR due to agreement between landlord and tenant to surrender the tenancy prior to the agreed minimum term. The Landlord is responsible for ensuring any financial loss in respect of fees paid, rent
            etc is deducted from the deposit. Any pro rata credit in respect of fees, payable to the Landlord in these circumstances will only be paid to the extent that any financial loss caused by the tenant has not been recoverable from the tenant for their breach. Should you have any doubts as to the value to withhold from the deposit in this regard, contact the local office for
            assistance".


            From the AST it states:

            "This agreement is a legal and binding contract and the Tenant is responsible for the payment of rent for the entire agreed term. The agreement many not be terminated early unless the agreement contains a break clause, or written permission is obtained from the Landlord. In the event of the tenant terminating this agreement outside of its agreed terms the tenant will be liable for the landlord's fees and any rent due until the property is re-let or the end of the tenancy, whichever occurs sooner."

            The LA has already taken all their fees for the entire contract from the first month's rental payment and deposit. They have provided me a certificate stating that the total deposit is protected with Tenancy Deposit Solutions.

            With the above in mind, is it reasonable (and legal) for the letting agent to charge their fees for the entire contract? Is it reasonable (and legal) for me to chase the tenant for the loss?

            Comment


              #7
              I would have thought it is not reasonable for you to charge the tenant for the LA's fees for the remainder of the contract unless it was set out to the tenant in writing not only that these fees would be payable but also how much they were. The clause in the AST doesn't say what the fees are and it isn't the tenant's fault if the agent charges a fortune as it was you who agreed the terms with the agent and you who chose that agent. If the contract the tenant got had said it was fees of 10% per month for all months then maybe different.
              ~~~~~

              Comment


                #8
                Originally posted by driver View Post

                With the above in mind, is it reasonable (and legal) for the letting agent to charge their fees for the entire contract? Is it reasonable (and legal) for me to chase the tenant for the loss?
                Based on your re-post, very probably, yes and yes.

                You've agreed to pay the agent a fee based on the term of the tenancy, but the tenant has breached the tenancy and that is not (subject to you claiming the LA was in breach of contract) the LA's fault. Whether or not you hold the tenant to the terms of the tenancy agreement is, so far as the LA is concerned, a matter between you and the tenant.

                It would, I would say, be (so far as the tenant is concerned) foreseeable that you would have to pay the agent fee for a tenancy of a certain term in any event, but in fact, you (through the LA) have made the position quite clear in the tenancy agreement. As such, you have a claim against the tenant from their deposit. Whether you have a claim against the tenant over and above the level of their deposit is less clear as the agent's terms seem to state that if the additional loss is not recoverable, then they will give you credit back of your fees (and you have not, therefore, suffered that additional loss of fees).

                You can use 2 lines of argument against the agent:

                (1) You could claim that you have first call on the deposit for the rent arrears, and then if there is anything left over in the deposit (if applicable), you have to pay that sum to the agent as fees. Anything over and above that amount paid to the LA is seemingly not recoverable under their terms and you will be due credit back. However, in both the LA's terms and in the tenancy agreement, "fees paid" comes before "rent" in the sequence of losses, and it could be argued this gives the LA priority.

                If you involve them as adjudicators, the TDS will probably rule that the deposit is due to you as rent on account of the tenant's breach (they will not get involved in arguments between you and the LA). The LA would then have to sue you for their fee, or may well claim that as soon as the TDS adjudicator handed down their ruling, you became beneficially entitled to the deposit money, but as they are holding it and you puportedly owe them fees, then they have a lien over that money.

                (2) However, as the LA didn't appear to reference the tenant properly, you would still also have a right of action against the LA.

                In summary (sorry, it is procedurally complex:

                (1) If the LA tries to snaffle the deposit, you could sue the LA for your losses arising out of their breach of contract (rent arrears, wasted agency fees, advertising costs, court costs and legal fees incurred in evicting the tenant (if any)). They will probably counterclaim their fee, but that will be defended by you on the same grounds as your claim. They may also possibly try to join the tenant as a Pt20 defendant (ie: they will try to pass the loss onto the tenant) on the grounds that the tenancy agreement confers a benefit on them under the Contracts (Rights of Third Parties) Act 1999 (arguable but weak). If you don't already have a money judgement against the tenant for the arrears and lost fees (ie: from your proceedings against the tenant, if any go ahead), you could also join the tenant as a Pt20 defendant to the LA's counterclaim against you on the grounds that if you don't sucessfully defend the LA's counterclaim, then the tenant caused you a loss of benefit from the fee, or caused you to pay fees twice over.

                If you already have a judgement against the tenant from eg: s.8 proceedings, or a simple claim for the arrears, then you could not join them as Pt20 defendants because that would amount to re-litigating the matter in dispute between you and them, which would be res judicata (the thing is already judged) and any such Pt20 claim by you against them arising out of the same facts would therefore be struck out as an abuse of process.

                (2) You could sue the tenant for your rent arrears, lost fees etc.


                I'd still try to settle with the agent on the terms I previously suggested.

                Caveat - I was tired when I wrote the above, so do check it further, or wait to see if anyone else on the board gives well-argued reasons why my analysis is incorrect.
                Health Warning


                I try my best to be accurate, but please bear in mind that some posts are written in a matter of seconds and often cannot be edited later on.

                All information contained in my posts is given without any assumption of responsibility on my part. This means that if you rely on my advice but it turns out to be wrong and you suffer losses (of any kind) as a result, then you cannot sue me.

                Comment


                  #9
                  I agree with Agent46 on this one, Your LA seem to have covered all the bases ( from their protection point of view )

                  If future only agree to a six month term, that will limit your outlay in such situations.

                  Comment


                    #10
                    Originally posted by driver View Post
                    The exact term from my agreement with LA is as follows:

                    "Where the tenancy has terminated prior to the agreed minimum tenancy term advised in the tenancy agreement, and that termination is due to a breach by the tenant OR due to agreement between landlord and tenant to surrender the tenancy prior to the agreed minimum term. The Landlord is responsible for ensuring any financial loss in respect of fees paid, rent
                    etc is deducted from the deposit. Any pro rata credit in respect of fees, payable to the Landlord in these circumstances will only be paid to the extent that any financial loss caused by the tenant has not been recoverable from the tenant for their breach. Should you have any doubts as to the value to withhold from the deposit in this regard, contact the local office for
                    assistance".


                    From the AST it states:

                    "This agreement is a legal and binding contract and the Tenant is responsible for the payment of rent for the entire agreed term. The agreement many not be terminated early unless the agreement contains a break clause, or written permission is obtained from the Landlord. In the event of the tenant terminating this agreement outside of its agreed terms the tenant will be liable for the landlord's fees and any rent due until the property is re-let or the end of the tenancy, whichever occurs sooner."

                    The LA has already taken all their fees for the entire contract from the first month's rental payment and deposit. They have provided me a certificate stating that the total deposit is protected with Tenancy Deposit Solutions.

                    With the above in mind, is it reasonable (and legal) for the letting agent to charge their fees for the entire contract? Is it reasonable (and legal) for me to chase the tenant for the loss?
                    I think that it would be reasonable and legal for you to chase the tenant for the twelve months rent and the 12 months agents fees. However unless there are very special circumstances surrounding this particular bad tenant, you are likely to be throwing good money after bad. If he pays £2050 and leaves the property that will be a good start; you can then sue for subsequent losses including the Agents fees. The amount of the loss will depend on how long it takes to relet. You would have to try to track the tenant down and get an attachment of earnings (assuming he is employed).

                    The chances of successfully recovering your losses from the tenant are in my opinion, unfortunately very small. However, if I am reading your Agents terms correctly, they do imply that the fees will not be payable (they put this in terms of pro-rata credit) if you have been unable to recover your losses from the tenant - so you may have to go through the process.

                    As I said in my first post, I think there is a very good chance that the Agents were negligent in relation to their checking out procedure and it is clearly unreasonable for them to charge £1500 for a service which has produced such a disaster. Agent 46 suggests you try to reach a compromise with them and that is certainly worth a try. If that fails and assuming that the Agents cannot prove that they were diligent in checking the tenant, you will have to go to the Courts to recover the fee. You want the money not "pro-rata credit since you will obviously not be using the services of that Agent again.

                    Good luck.

                    Comment


                      #11
                      Originally posted by agent46 View Post
                      It would, I would say, be (so far as the tenant is concerned) foreseeable that you would have to pay the agent fee for a tenancy of a certain term in any event, but in fact, you (through the LA) have made the position quite clear in the tenancy agreement.
                      It is foreseeable that the tenant has to pay some agents fees but it not at all clear that it's based on a monthly fee for the whole contract.

                      Originally posted by driver View Post
                      So at the end of the day, the letting agent gets double fees...
                      The AST says:

                      In the event of the tenant terminating this agreement outside of its agreed terms the tenant will be liable for the landlord's fees and any rent due until the property is re-let or the end of the tenancy, whichever occurs sooner.

                      Which would lead me to think the tenant is responsible for fees incurred in re-letting and once re-let no more fees are due. It does not explain that there will be a 10% charge for all months till the end of the old AST term (or break) even if the property is re-let.

                      I doubt many tenants would know how the agent's fees are structured. If the fees are not explained to the tenant then how come they are expected to be bound by something that wasn't explained to them?

                      It's a bit like the AST saying the tenant must meet the terms of the landlords insurance without providing the insurance documents - doens't hold up.
                      ~~~~~

                      Comment


                        #12
                        Originally posted by Ruth Less View Post
                        It is foreseeable that the tenant has to pay some agents fees but it not at all clear that it's based on a monthly fee for the whole contract.

                        The AST says:

                        In the event of the tenant terminating this agreement outside of its agreed terms the tenant will be liable for the landlord's fees and any rent due until the property is re-let or the end of the tenancy, whichever occurs sooner.

                        Which would lead me to think the tenant is responsible for fees incurred in re-letting and once re-let no more fees are due. It does not explain that there will be a 10% charge for all months till the end of the old AST term (or break) even if the property is re-let.

                        I doubt many tenants would know how the agent's fees are structured. If the fees are not explained to the tenant then how come they are expected to be bound by something that wasn't explained to them?

                        It's a bit like the AST saying the tenant must meet the terms of the landlords insurance without providing the insurance documents - doens't hold up.
                        When considering foreseeability, if the type of damage is reasonably foreseeable then the Court will not be concerned that the extent of the damage was not. A defendant takes their claimant pretty much as they find them.
                        Health Warning


                        I try my best to be accurate, but please bear in mind that some posts are written in a matter of seconds and often cannot be edited later on.

                        All information contained in my posts is given without any assumption of responsibility on my part. This means that if you rely on my advice but it turns out to be wrong and you suffer losses (of any kind) as a result, then you cannot sue me.

                        Comment


                          #13
                          Originally posted by agent46 View Post
                          When considering foreseeability, if the type of damage is reasonably foreseeable then the Court will not be concerned that the extent of the damage was not. A defendant takes their claimant pretty much as they find them.
                          Surely a claim must be reasonable? If the agent has a charge to the landlord of 10K then that could not be passed on to the tenant for leaving early. I thought the amount must be supported.

                          So in the case of an agent charging 10% of rent for the whole contract for tenant find we could have:

                          1. A six month contract - tenant find fee 10% of 6 months rent.
                          2. A twelve month contract - tenant find fee 10% of 12 months rent.
                          3. A renewal of 12 months after an initial 12 month contract - tenant find fee 10% of 24 months rent.

                          etc.

                          So I would argue that the real fee for tenant find is capped at 10% of 6 months rent as each of the above examples involved the same amount of work for the agent. The rest is just money for old rope and are the landlord's fault for signing such a silly contract. I do not see why the tenant should be liable for more than 10% of 6 months rent as the AST certainly leads me to believe the tenant is liable for re-letting fees not some bloated arbitrary charge based on contract length.

                          Why do landlords even sign up to such contracts? Why do agents structure their fees that way?

                          Note this is for tenant find only, the agent is not involved in managing the property. If managing the property then of course a monthly fee makes sense.
                          ~~~~~

                          Comment


                            #14
                            Originally posted by Ruth Less View Post
                            Surely a claim must be reasonable? If the agent has a charge to the landlord of 10K then that could not be passed on to the tenant for leaving early. I thought the amount must be supported.

                            So in the case of an agent charging 10% of rent for the whole contract for tenant find we could have:

                            1. A six month contract - tenant find fee 10% of 6 months rent.
                            2. A twelve month contract - tenant find fee 10% of 12 months rent.
                            3. A renewal of 12 months after an initial 12 month contract - tenant find fee 10% of 24 months rent.

                            etc.

                            ?
                            As I've already said, the fee recoverable from the tenant is the fee charged by the LA to the LL, subject to the other matters I have raised about the term in the contract that seems to write-off (or convert into credit) any fees owed to the LA that cannot be recovered from the deposit.

                            Have another read of the extract from the contract between the LL and the LA. In this case, it appears the LL was liable to pay fees based on the term of the contract, subject to a minimum fee calculated by reference to the point at which the tenant can lawfully terminate the tenancy (IIRC, 12 months in this case, but I can't read if from my screen as I'm writing this because the post is on another page). So in this matter, as the contract is explicit on the point, there would be no question of the LL succeeding in any attempt to inflate the size of the claim.

                            The terms of the contract are matters to be proved in evidence - which in this case would be easily obtained as a witness statement from the LL standing as his evidence in chief, and the contract itself as an exhibit.
                            Health Warning


                            I try my best to be accurate, but please bear in mind that some posts are written in a matter of seconds and often cannot be edited later on.

                            All information contained in my posts is given without any assumption of responsibility on my part. This means that if you rely on my advice but it turns out to be wrong and you suffer losses (of any kind) as a result, then you cannot sue me.

                            Comment


                              #15
                              Originally posted by agent46 View Post
                              As I've already said, the fee recoverable from the tenant is the fee charged by the LA to the LL, subject to the other matters I have raised about the term in the contract that seems to write-off (or convert into credit) any fees owed to the LA that cannot be recovered from the deposit.

                              Have another read of the extract from the contract between the LL and the LA. In this case, it appears the LL was liable to pay fees based on the term of the contract, subject to a minimum fee calculated by reference to the point at which the tenant can lawfully terminate the tenancy (IIRC, 12 months in this case, but I can't read if from my screen as I'm writing this because the post is on another page). So in this matter, as the contract is explicit on the point, there would be no question of the LL succeeding in any attempt to inflate the size of the claim.

                              The terms of the contract are matters to be proved in evidence - which in this case would be easily obtained as a witness statement from the LL standing as his evidence in chief, and the contract itself as an exhibit.
                              Yes we agree on what the contract between the LL and the LA says. I did not mean that the LL would inflate the size of the claim. I meant what if the charge the agent made and wrote in the contract was inflated in the first place?

                              The point I was making is that these terms were not disclosed to the tenant at the time of signing the AST. Are you saying that the tenant should be bound by the charges in the the contract between the LL and the LA no matter how extortionate they are when the tenant has not even seen the terms before he vacated the property? Surely any penalties charge to the tenant should have some resemblance to work done/costs incurred by the agent?

                              PS. Why is it agents structure their fees this way for tenant find only? Why do landlords agree to giving away a percentage of rent for the whole contract term (and renewals) for tenant find only? It seems mad.
                              ~~~~~

                              Comment

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