Tenant taking me to court over deposit

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    Tenant taking me to court over deposit

    Hi guys, I'd really appreciate sme advice. I placed a tenant into my property some six months ago under a twelve month AST.

    I don't place a deposit in a government scheme, instead, I charge my tenants an admin fee towards referencing etc. there is NO mention of any deposit or monies held in the AST.

    In this instance I used a lettings agency to find my tenant and reference I have just found out that when the agency took his admin fee and ran the referancing, they issued him with a receipt which mistakenly said that his fee was for a security deposit rather than admin charge.

    Tenant stopped paying rent after five months. When questioned, he said he was leaving the property convinced he had signed a six month contract! After I explained that he signed for a year, he said he couldn't afford to stay and the left, effectively abandoning the tenancy.

    Out of the blue. I have been contacted by a no win no fee law firm. He's taking me to court saying that I am illegally holding his security deposit. I have explained to his representative that he abandoned the property and was in breach of contract. I also explained that the AST makes no mention of a security deposit. Trouble is, he says that the receipt issued by the lettings ageency is proof of a deposit and though he agrees that he did not provide notice and left the property illegally he says that I am still liable to pay him back a deposit as I illegally held money outside of a government scheme!

    They are apparently going to persue through a small claim court! Can someone out there advise me if the scumbag has a leg to stand on here? Surely he breached the contract and thaany all that should matter? any advice would be much appreciated...

    #2
    You can't be pursued throu the small claims track for non-protection of the deposit, it is a part 8 claim and must be heard in the fast track or multi track. That means court fees of at least a thousand pounds. That may be enough to discourage the claim, but if they follow it through, and you lose, you could be ordered to pay that too.

    If the tenant is only claiming the value of the deposit (ie not a penalty) then that may well be a small claim. You would presumably counterclaim for the breach of the tenancy and defend his claim pretty much as you have explained here.

    Your 'offence' of not protecting a (potentially non-existant) deposit does not affect your ex-tenants obligations.

    Comment


      #3
      A claim for non-compliance with deposit protection is not heard in the small claims track, but the multi-track. The court fees are a lot higher and each party is exposed to the other party's legal costs.

      If T claims against you, then you must not only defend the claim by arguing that the deposit wasn't a deposit, but by counterclaiming for rent due under the terms of the contract. You will need the letting agent to agree to act as witness that the money taken wasn't a deposit.

      How much was this 'admin fee', though? And did the agent not charge VAT on it if it was an admin fee? (which would be a very strange oversight).

      How much is the monthly rent? Have you re-let the property? (if so, how long after T vacated?)

      Is this 'law firm' real? Have you checked their credentials?

      (BTW, why on earth didn't you ask for a deposit???)

      Comment


        #4
        This shows shy I get into ARGUMENTS with my letting agents to ensure they call their admin fee just that instead of a deposit. I explain all the implications to them, and THEY STILL DON'T GET IT!

        Comment


          #5
          Hey guys, thanks or the replies, I really appreciate your assistance and knowledge. I have now filled the property, it was empty for at last a month. I also had to pay around 600 pound to refurb after he left, all of which I have receipts for. The admin fee I charged was one month rent. Trouble is, the letting agent gave him a receipt (of which I now have a copy) which says, one month security deposit, one month in advance, agency Amin fee, etc. So far, I have only had two phone calls from the law agency. We reached an impass on the phone with me saying that I reuse to pay a penny back. He says they will peruse me through a small claims court for three months tendency (£1200). I'm even more scared now that you guys say I might have today court costs! Can you give me some advise guys? Will I have the option to settle before we get to court? Is it worth paying this joker his £400 back?...

          Comment


            #6
            Originally posted by Perplexed View Post
            This shows shy I get into ARGUMENTS with my letting agents to ensure they call their admin fee just that instead of a deposit. I explain all the implications to them, and THEY STILL DON'T GET IT!
            Hmm. Shows why I don't get involved with letting agents full stop..

            Comment


              #7
              I month rent for credit & other ref checks is mighty high and some may be seen as a disguised deposit, esp if OP instructed LA to charge that level of fee. OP is beyond the grace period allowed by the Localism Act, so whether deposit is repaid or not, IMO he is still liable for 1 - 3X penalty.

              Comment


                #8
                If I were you I would offer to settle. Point out that you'll fight the case on the basis that, whatever the receipt says, the 'deposit' was in fact an admin fee and charged for services provided to the tenant rather than held as security for his obligations. When working out an amount to offer as a settlement consider that if you lose you will have to pay back the amount of the 'deposit' plus a penalty of at least the deposit amount again and possibly up to three times the deposit at the discretion of the judge. You may also have to pay the tenant's court costs.
                Disclaimer:

                The above represents my own opinion, derived from personal knowledge and should not be relied upon as definitive or accurate advice. It is offered free of charge and may contain errors or omissions or be an inaccurate opinion of the law. I accept no liability for any loss or damage suffered as a result of relying on the above.

                Comment


                  #9
                  Originally posted by mariner View Post
                  I month rent for credit & other ref checks is mighty high and some may be seen as a disguised deposit
                  I agree it's very high, but if there was never any intention to pay it back (eg "if you return the property undamaged I'll return the admin fee as a thank-you") then surely that deals with the main definition of a deposit?

                  All of which appears to be a moot point given the unfortunate receipt which states that it IS a deposit though...

                  Comment


                    #10
                    Bigboy, can you provide any proof that this 'one month' admin fee was your standard practice, even better, can the agents confirm it if they have dealt with previous tenants for you? Do you have anything in your instructions to this agent that they should charge such a fee? Being able to prove (or at least, convince a judge) that will be essential.

                    If it is any consolation, I get the impression that the 'law agency' are not experts in this field.

                    Comment


                      #11
                      Originally posted by Bigboy View Post
                      The admin fee I charged was one month rent. Trouble is, the letting agent gave him a receipt (of which I now have a copy) which says, one month security deposit, one month in advance, agency Admin fee, etc.
                      So, you charged an admin fee of £400, and the agency also charged an admin fee?? Please answer my question about VAT - assuming the agency is registered for VAT, what did they charge VAT on?

                      Also, as Snorkerz says, if the agent is billing T, on your behalf, for your admin fees, then there should be something in writing between you and the agent recording the agreement to do this, particularly as it is not standard practice to charge both LL admin fees and agent admin fees. There should also be something in writing between T and agent agreeing to pay LL admin fees and agent admin fees (otherwise, how would the T know what he was writing a cheque to pay for?)

                      I have to say that the fact that your admin fee is equivalent to one month's rent doesn't help your case. Admin fees are fixed costs; the same whether the rent is £250pcm or £400pcm. Deposits, on the other hand, are usually based on the level of rent.

                      Will I have the option to settle before we get to court? Is it worth paying this joker his £400 back?...
                      You always have the option to settle before going to court. Has this 'law agency' sent you a letter before action? Or have they only phoned you? (if they haven't written, this indicates that they are not a very professional operation - as I asked before, have you actually checked their credentials, and that they are legally qualified to conduct a claim on behalf of the tenant. If they have only phoned, and you haven't checked, how do you know it's not just the tenant's mate phoning you?)

                      I have now filled the property, it was empty for at last a month. I also had to pay around 600 pound to refurb after he left, all of which I have receipts for.
                      You will need more evidence than this to prove T is liable for any alleged damage. Did you carry out an inventory/condition report at check-in?

                      Comment


                        #12
                        Is there any proof that the tenant acknowledged the 'fee' was a fee and not a deposit? Is it stated in the tenancy agreement? If not, how do you know that the agent didnt 'forget' to mention it? Given he got a receipt for a deposit, it makes sense that he assumed it was one.

                        Maybe the agents tried to avoid him challenging it. To be honest, I wouldnt go anywhere near an arrangement like this. Apart from the LA fees, having to pay an extra fee equal to what I'd normally pay as a deposit (which is refundable) doesnt make any sense. Cause on top of all, you can still sue for damages even though you are not holding a deposit. I would only agree to pay it, if I intended to trash the place, hoping that having to go to court to claim for damages, would put the LL off.
                        All views posted reflect my personal opinion only and do not constitute professional advice which I am not qualified or knowledgeable enough to provide.

                        Comment


                          #13
                          Give up now while you are ahead.

                          Comment


                            #14
                            A landlord is charging a fee equal to one month as an admin fee?

                            Our admin fee(agency) is fixed, and is less than one half of the average monthly rent for a 1 bedroomed flat.
                            Allow tenants to protect their own deposits. I want free money when they do it wrong

                            Comment


                              #15
                              Originally posted by thesaint View Post
                              A landlord is charging a fee equal to one month as an admin fee?

                              Our admin fee(agency) is fixed, and is less than one half of the average monthly rent for a 1 bedroomed flat.
                              And whilst I am no fan of agents, I bet your overheads are a lot higher than the landlords

                              Comment

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