Is my estate agent misleading me?

[jpkeates]

The point does not though need considering for this particular thread as the tenant is a company and is not a consumer for the purposes of the CRA 2015.

Good point - I'd forgotten that!

[Lawcruncher]

That conclusion makes the assumption that the wording of the tenancy agreement contains an agreement about the deposit which is enforceable, that the reason for the default is not in dispute and ignores the issue that a tenancy agreement is a consumer agreement, which a commercial lease is (usually) not.

A point worth considering. If the CRA 2015 applies it will be a question of whether (a) a deposit is intrinsically unfair (b) the unfairness depends on the terms on which the deposit is held. We can also ask if section 72 prevents deposit provisions coming under the Act. Do deposit provisions relate to "a settlement of a claim"? Any court case which answered the question in favour of tenants would have to apply to all deposits notwithstanding the statutory protection of deposits paid in respect of ASTs because the CRA 2018 applies to residential tenancy agreements.

The point does not though need considering for this particular thread as the tenant is a company and is not a consumer for the purposes of the CRA 2015.

Whether or not the CRA 2015 applies, a very practical point is that there are no sanctions of the kind set out in the Housing Act 2004. The only recourse for a non-AST tenant who disputes the retention of a deposit is to apply to the court.

The question here is in any event not so much what the tenant's rights are, but who should be in control of the deposit. If the tenancy agreement says the deposit is to be paid to the landlord then it really ought to be in the landlord's hands notwithstanding any agreement between the landlord and the agent because the tenant is not a party to the management agreement. Abimsalabim needs to ask the agent where it says in the management agreement that the agent controls the deposit. If there is no such provision there is no justification whatsoever for the agent to retain the deposit. If there is something then the next question is how does the management agreement override the tenancy agreement. If the agent is still insistent that he must retain the deposit then tell him it is down to him to apply it as he sees fit or make an application to the court for directions as to its application.

[jpkeates]

That conclusion makes the assumption that the wording of the tenancy agreement contains an agreement about the deposit which is enforceable, that the reason for the default is not in dispute and ignores the issue that a tenancy agreement is a consumer agreement, which a commercial lease is (usually) not.

[Lawcruncher]

Assuming the wording is all it should be, consent is not required because the agreement will say that the landlord can draw from the deposit when the tenant is in default. Go here: https://www.lexisnexis.co.uk/legal/g...s-but-does-not. Whilst referring to commercial deposits the position is the same for any tenancy deposit not required to be protected. As the article points out, the whole point of a deposit is that if a tenant defaults a landlord has funds immediately available to draw on without taking legal action. The fact that that was the case in respect of ASTs is the very reason why deposit protection was introduced.

[jpkeates]

If the tenant's consent is required but not forthcoming then it is no use going to court. The court will say it cannot order the tenant to give consent. The position is no different from the deposit payable on the purchase of land. If the purchaser defaults the vendor gets to retain the deposit without the purchaser's consent.

The court can both award compensation and instruct a third party to release funds that they hold in order to satisfy it.
They do this fairly routinely where a deposit protection company has a deposit in its control and the court awards it (or some of it) to the landlord and/or the tenant.

I don't agree that the situation is the same as the deposit payable on the purchase of land.
That follows a wholly different and well established set of rules.
And the outcome there is reasonably binary, either the sale proceeds or it doesn't.

With a tenancy deposit if there are terms on which it is held they are a combination of the tenancy agreement (plus any deposit protection terms), but essentially the deposit is being held on trust for return or to be used to satisfy a possible liability.

There is no presumption of offset in English law, so, even if the tenant owes something to the landlord that is not disputed, the landlord can't simply make use of a sum of money that they, essentially, owe the tenant.

[Lawcruncher]

I have to disagree with post 15.

If the tenant's consent is required but not forthcoming then it is no use going to court. The court will say it cannot order the tenant to give consent. The position is no different from the deposit payable on the purchase of land. If the purchaser defaults the vendor gets to retain the deposit without the purchaser's consent. If the purchaser defaults and the deposit is held by a stakeholder, the stakeholder has to make a decision about what to do with the deposit. The way to look at it is that the duty of the stakeholder is to the deposit and to ensure that it goes to the right person. If there is a dispute and the stakeholder does not see the issue as clear-cut he can apply to the court for directions: https://www.justice.gov.uk/courts/pr...d-applications. A letting agent who does not want the responsibility ought not to take deposits.

The above is the default. The parties are free to agree any procedure which needs to be gone through to determine liability. Complications are though best avoided in the case of residential property.

[jpkeates]

Whilst the deposit may be the tenant's money it is quite incorrect to suggest that it cannot be applied to remedy any breach without the tenant's consent. That would make it useless as security.

But that is the position.
It is a convenient (and common practice), but it's the tenant's money until they agree to its use.

It's possible for the tenant to agree what it's to be used for in a tenancy agreement, but, even so, they'd have to agree separately to things that are not knowable at that point (like damage).

[Lawcruncher]

If the tenancy agreement says that the deposit should be held by the landlord then it is the landlord who should be holding it irrespective (surely?) of what the management agreement says. Whoever in fact holds it holds on the terms set out in the tenancy agreement.

If the agent insists on keeping it you tell him that he must be holding it as a stakeholder. That imposes upon him a duty to apply the deposit as the tenancy agreement requires. If he is unsure how to apply it it is he who must apply to the court for directions. It is nonsense for him to say that you must apply to the court before he can release it.

Whilst the deposit may be the tenant's money it is quite incorrect to suggest that it cannot be applied to remedy any breach without the tenant's consent. That would make it useless as security.

[abimsalabim]

The problem is that the agent isn't bound by the tenancy agreement, and what they do with the deposit depends on their agreement with you.

As you can't do anything with the deposit anyway, because it's the company's money and they don't agree that you can have any of it, it's a bit academic (other than it's a better position for you to have the money and for them to have to recover it).
My guess is that, if you had it, they'd just sue you for it back anyway.

You're going to have to sue the company if they won't accept your claim.
Which sounds pretty weak, to be honest, if all you've got to go on is that there's no damage noted on the check in report.
Either the property was in a decent condition or it wasn't and you should be able to show that it was in a good condition.

Apart from the check-in and check-out inventory reports (which I have), what else can I use as evidence that the property was in good condition? Is there any other strong evidence?

[jpkeates]

The tenant agreement states that the Landlord should hold onto the deposit until the dispute is resolved but, the agent is disputing this, claiming that they are the ones to hold onto the deposit as part of their Full Management Service

The problem is that the agent isn't bound by the tenancy agreement, and what they do with the deposit depends on their agreement with you.

As you can't do anything with the deposit anyway, because it's the company's money and they don't agree that you can have any of it, it's a bit academic (other than it's a better position for you to have the money and for them to have to recover it).
My guess is that, if you had it, they'd just sue you for it back anyway.

You're going to have to sue the company if they won't accept your claim.
Which sounds pretty weak, to be honest, if all you've got to go on is that there's no damage noted on the check in report.
Either the property was in a decent condition or it wasn't and you should be able to show that it was in a good condition.

[abimsalabim]

In a case where the deposit protection rules do not apply how a deposit is dealt with depends on the terms on which it is held. What does the tenancy agreement or other relevant document say?

The tenant agreement states that the Landlord should hold onto the deposit until the dispute is resolved but, the agent is disputing this, claiming that they are the ones to hold onto the deposit as part of their Full Management Service

[Lawcruncher]

In a case where the deposit protection rules do not apply how a deposit is dealt with depends on the terms on which it is held. What does the tenancy agreement or other relevant document say?

[jpkeates]

If the agent is refusing the mediate the dispute between the tenant and myself but, is instead asking me to go to court, what are my options in terms of penalising the agent? Apart from firing them, can I get compensation from them failing to provide their services?

If you’ve paid them for a service they are refusing to provide, yes.

I’d start by invoicing the tenant company for the damage though.
You have two separate claims and it’s unlikely that the agent would bust a gut to do the job you want them to do.

[abimsalabim]

I assume you mean that the agent is holding the deposit but has it insured through one of the deposit schemes. The agent must contact the scheme to make a claim against the deposit to be paid to you. If they refuse, ask them for what purpose they have taken a deposit. Whatever happens, never let an agent handle the deposit again.

As I said in the original post, the deposit is NOT in a Tenancy Deposit Scheme but, instead is being held directly by the Agent.

[abimsalabim]

The deposit belongs to the tenant, so it can't be given to you as compensation for your loss(es) unless they agree.
Which they don't seem to.

I'm not exactly sure what you mean by, "the agent is refusing to handle the matter".
Either they provide a service to you where they are meant to agree such things with the tenant (in which case they should sort it out) or they don't.

But they can't just give you the deposit, if that's what you mean.

If the agent is refusing the mediate the dispute between the tenant and myself but, is instead asking me to go to court, what are my options in terms of penalising the agent? Apart from firing them, can I get compensation from them failing to provide their services?