Buying tenanted house with arrears, deposit?

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    Buying tenanted house with arrears, deposit?

    I've agreed to buy a house with tenants in place. They have significant arrears on their account with the existing landlord which the tenant is paying off monthly, in addition to the usual rent. I'm OK with this, the landlord will keep these debts leaving me with a clean slate, so to speak.

    However: there is a 6 week rent deposit in place, protected. Would I be right in thinking that this deposit 'belongs' to the tenancy agreement rather than the existing landlord? In other words, I don't think the existing landlord can take this deposit and use it against his rent arrears; leaving no deposit in place.

    I'll probably run this by my conveyancing solicitor but thought I'd run it here first.

    Any thoughts?

    #2
    When you buy the house you are intending to take over the original tenancy agreement? If so then the deposit, which is still the tenant's money, must also be transferred in to your deposit protection account. You must inform the tenant that you are the new owner via a S48 notice and that rent is now payable to you.

    Whatever private agreements you have with the previous owner will have nothing to do with the tenant so you wont have a 'clean slate' what you will be buying is a house where the tenant already has an unreliable record for paying rent. I think you may be wiser to get the current owner to issue an immediate S21 and possibly a S8 if there are more than 2 months owing. Your decision.
    I offer no guarantee that anything I say is correct. wysiwyg

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      #3
      Originally posted by Ricco E View Post
      there is a 6 week rent deposit in place, protected. Would I be right in thinking that this deposit 'belongs' to the tenancy agreement rather than the existing landlord? In other words, I don't think the existing landlord can take this deposit and use it against his rent arrears; leaving no deposit in place.
      The deposit belongs to the tenant and is held by the landlord. So you indeed want the seller to transfer it over to you because you will be the one who will have to refund it to the tenant.

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        #4
        Thanks for the replies, it's confirmed what I thought.

        As regards the tenant's arrears: rent was part paid directly, housing benefit. The tenant's circumstances changed, benefit was stopped. Benefit has now been reinstated. Tenant has paid 3x monthly agreed figure (to clear arrears in 7 months total), in addition to the rent. I considered asking the existing landlord to issue s21 but decided against it, based on tenant's performance in repaying the arrears.

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          #5
          Is the money from housing benefit covering the entire rent?
          If "yes", have you seen documentation to prove this?
          Allow tenants to protect their own deposits. I want free money when they do it wrong

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            #6
            No, the housing element part is around 2/3 of the rent. The rest they pay themselves.

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              #7
              You seem to be happy to accept current Ts with their current T record?
              If so, on completion of sale you beome their new LL and accept current AST T&Cs. You are liable for existing T deposit so vendor should transfer this amount to you as a condition of completion. Belt & braces I would provide Ts with proof of new deposit protection along with 'reqd info' and s48 notice. You should also notify HB of change of ownership and request that HB payments due after completion date should be paid to extant LL (you).
              Vendor can pursue Ts for rent owing up to date of completion as a financial debt via SCC if he wishes.

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                #8
                If you buy a property with a tenancy in place, then you must, after purchase, inform the T, in writing, that you are the new owner/landlord, and give your name and address - this is a notice under s.3 Landlord and Tenant Act 1985.

                You must also give notice, in writing, under s.48 Landlord and Tenant Act 1987, informing the T of an address in England/Wales at which notices may be served on you.

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                  #9
                  Originally posted by Ricco E View Post
                  No, the housing element part is around 2/3 of the rent. The rest they pay themselves.
                  So, they are going to continue paying the old landlord and yourself after you are the new landlord.
                  Sounds messy to me.
                  Allow tenants to protect their own deposits. I want free money when they do it wrong

                  Comment

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